South African company partnering with European giant in R28 billion deal
Sappi and Finland-based UPM-Kymmene Corporation plan to launch an independent 50/50 Joint Venture for graphic paper that combines their European and American operations.
The parties signed a non-binding letter of intent to form a non-listed, independent 50/50 Joint Venture for graphic paper.
It will bring together Sappi’s European Graphic Paper business with UPM’s Communication Papers business in Europe, the UK and the US.
The move will be subject to the fulfilment of several regulatory and other conditions, including shareholder approval.
The parties intend to sign definitive agreements during the first half of the 2026 calendar year.
They also expect to close the proposed transaction by the end of the calendar year 2026, once all conditions precedent are fulfilled.
The companies said that the joint venture represents a decisive response to the structural changes in the European graphic paper industry.
It said that the move will strengthen its resilience and provide long-term commitment and supply security to customers.
“Sappi is very excited by the potential that this joint venture, if approved, will bring,” said Sappi CEO Steve Binnie.
“We have been searching for a solution to secure a long-term, profitable future for our European business.”
Binne added that the partnership with UPM will deliver a focused business that brings the best assets and people of their combined businesses to create a strong future.
“The proposed joint venture provides a unique opportunity to unlock value for our shareholders.”
“The transaction delivers on Sappi’s Thrive strategy to reduce our direct exposure to the graphic paper segment and enables us to reposition our portfolio towards higher-growth, higher value segments.”
Sappi said that its direct sales volume to the graphic paper segment will decrease to below 20% after the transactions are completed.
The 50% shareholding in the joint venture is expected to generate more value than the standalone Sappi graphic paper business.
“Ultimately, the transaction will enable Sappi to reduce debt in the medium term, and in the future, the cash dividends from the joint venture will further lower debt,” added Binnie.
How it will work
The new joint venture launch takes place against a backdrop of sustained structural decline in demand within the graphic paper market, as well as overcapacity and low asset utilisation.
Sappi stated that this erosion has been caused by several factors, including shifts towards digital media, as print advertising revenues and newspaper and magazine circulations decline.
This has only been made more challenging by the intensified rise in costs, especially energy costs in Europe.
“To remain competitive and sustainable in the long term, consolidation is needed,” said Marco Eikelenboom, CEO of Sappi Europe.
“Consolidation will contribute to a more robust and resilient European graphic paper industry, safeguarding security of domestic supply for the printing sector.”
The companies believe that the synergies created via the Joint Venture will be at least €100 million (R2 billion) per annum once the Transaction is implemented.
As per the deal, Sappi will contribute the following assets:
- Gratkorn Mill (Austria);
- Ehingen Mill (Germany),
- Maastricht Mill (The Netherlands),
- Kirkniemi Mill (Finland) and
- Sappi Europe’s wood supply Joint Ventures.
UPM will contribute their Communication Papers business assets, which are located at the following UPM mills:
- Augsburg (Germany),
- Schongau (Germany),
- Nordland paper lines 1 and 4 (Germany),
- Rauma, including UPM RaumaCell (Finland),
- Kymi (Finland),
- Jämsänkoski paper line 6 (Finland),
- Caledonian (United Kingdom), and
- Blandin (United States of America).
Sappi and UPM will sell their respective businesses and assets to the newly formed Joint Venture, with a combined enterprise value of €1,420 million (around R28 billion at current rates).
The Joint Venture will then raise debt to fund the purchase prices payable to Sappi and UPM, respectively. The Joint Venture’s dividend policy will be to distribute all excess cash.
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