EU reiterates concerns over UPM and Sappi graphic paper joint venture

European Commission issues new Letter of Facts

The European Commission has issued a new Letter of Facts to UPM and Sappi, confirming its continued competition concerns regarding their planned European graphic paper joint venture. The two companies, which announced their intention to combine their graphic paper businesses in 2025 and signed a definitive agreement in May 2026, are currently analyzing the document and preparing a response.

The proposed joint venture aims to create an independent company with a 50% shareholding from both UPM and Sappi. The strategic rationale behind the move is to secure the long-term viability, competitiveness, and resilience of the European graphic paper industry, which has faced a structural decline in demand and significant overcapacity. Since 2007, graphic paper demand in Europe has decreased by over 60%, leading to unsustainable low utilization rates of assets.

Remedies proposed, but no divestments

In response to the Commission's concerns, UPM and Sappi are planning to submit proposals for specific remedies. However, both companies have stated that these remedies will not involve divestments, given the core rationale of the transaction. UPM has expressed disagreement with the Commission's preliminary assessment and remains committed to engaging with the review process.

The companies argue that without the joint venture, conditions in the European graphic paper industry would deteriorate further. They warn that European manufacturers would face growing pressure, potentially accelerating capacity closures and leaving customers more dependent on imports in the short term. A persistent market decline and overcapacity would make it increasingly difficult to maintain a competitive and reliable European supply base.

Global approvals secured, EU decision pending

While the European Commission continues its in-depth investigation, the transaction has already received merger control approvals in most other jurisdictions, including China, South Africa, and the United States. The European Commission's final decision is expected by the end of 2026 or shortly thereafter. If approved, the joint venture would become operational upon closing.

The proposed joint venture is being assessed at a time when the European Commission is updating its approach to competition policy to better reflect Europe's changing economic and strategic environment. The Commission's draft revised Merger Guidelines, published in April 2026, suggest a shift towards giving appropriate weight to resilience, innovation, and investment, alongside safeguarding effective competition.

The outcome of this regulatory review will have significant implications for the European graphic paper market, potentially reshaping the competitive landscape and influencing the future trajectory of the industry.

The consolidation of the European graphic paper market is a necessary step to ensure its long-term survival, and the UPM-Sappi joint venture represents a bold move to achieve this. Will the European Commission recognize the strategic importance of this transaction and approve it, or will it prioritize short-term competition concerns over long-term industry resilience? Follow The Paper for daily news, market signals and key updates from the global paper, corrugated and packaging industry. — Sigue toda la actualidad del sector en www.thepaper.ai