Sappi and UPM form paper joint venture

Sappi Limited and UPM-Kymmene Corporation have signed a non-binding letter of intent to form a 50/50 joint venture combining Sappi's European graphic paper business with UPM's communication papers business in Europe, the UK and the US.

The transaction, subject to regulatory approval and shareholder consent, is expected to close by the end of 2026. The parties intend to sign definitive agreements during the first half of 2026.

'The proposed joint venture represents a decisive response to the structural changes in the European graphic paper industry, offering a path to strengthen its resilience and provide long-term commitment and supply security to customers,' commented Steve Binnie, CEO of Sappi Limited and Massimo Reynaudo, president and CEO of UPM.

Binnie added that the partnership would deliver a focused business bringing together the best assets and people to create a strong future for customers while protecting the European manufacturing base. The transaction delivers on Sappi's Thrive strategy to reduce direct exposure to the graphic paper segment, with direct sales volume exposure decreasing to below 20 percent after completion.

The joint venture addresses sustained structural decline in demand within the graphic paper market alongside overcapacity and low utilization rates. This erosion has been caused by a structural shift toward digital media, declining print advertising revenues, falling newspaper and magazine circulations and rapid adoption of electronic media and workflows.

To remain competitive and sustainable in the long term, consolidation is needed. Consolidation will contribute to a more robust and resilient European graphic paper industry, safeguarding security of domestic supply for the printing sector,' noted Marco Eikelenboom, CEO of Sappi Europe.

By strategically reallocating production volumes to the most efficient paper machines, the joint venture will achieve more sustainable capacity utilization and stronger operational performance. Operational synergies are anticipated to be at least 100 million EUR per annum once implemented.

Sappi and UPM will sell their respective businesses to the newly formed joint venture with a combined enterprise value of 1,420 million EUR excluding synergy benefits. The Sappi business is valued at 320 million EUR based on an FY2025 EBITDA of 64 million EUR, representing a 5x multiple. The UPM business is valued at 1,100 million EUR, representing a 4.6x multiple of the last reported 12 months to September 2025 EBITDA.

Sappi will contribute Gratkorn Mill in Austria, Ehingen Mill in Germany, Maastricht Mill in the Netherlands, Kirkniemi Mill in Finland and Sappi Europe's wood supply joint ventures. UPM will contribute communication papers business assets located at mills in Augsburg, Schongau, Nordland, Rauma, Kymi, Jämsänkoski, Caledonian in the UK and Blandin in the US.