90-year-old company in South Africa worth R8 billion merging businesses with European giant
The Competition Commission has recommended that the proposed joint venture between South Africa’s Sappi and Finland’s UPM-Kymmene Corporation be approved.
This follows an announcement by the South African paper giant in May 2026 that it would be entering into an independent 50/50 partnership with the European materials producer.
UPM is a global materials solutions company that produces and markets renewable products.
It primarily serves business customers in the graphic paper, packaging, labelling, and speciality paper sectors.
Its direct presence in South Africa is limited mainly to its adhesive materials business.
Through the merger, Sappi said that it would bring its European Graphic Paper business together with UPM’s Communication Papers business in Europe, the UK and the US.
As part of the merger, Sappi would contribute multiple milling operations in Europe, including those in Austria, Germany, the Netherlands and Finland.
UPM, meanwhile, will add its communication papers business assets, including in Germany, Finland, the UK and the United States.
Sappi CEO Steve Binnie said that the joint venture is a solution to the group’s search for a long-term profitable future for its European business.
He framed the move as a means to remain competitive while also addressing sustainability requirements, particularly regarding the EU’s Clean Industrial Deal.
The groups noted that consolidating their assets would enhance operational performance, reduce their overall climate impact, and maximise value for shareholders.
The joint venture is expected to realise at least €100 million in operational synergies per annum, Sappi said.
The merger is also expected to boost Sappi’s financials and assist with the wider group’s struggles.
The 90-year-old company has suffered significantly over the past few years, going from record profits amid a boom in demand for its products circa 2022 to major losses in its most recent reporting periods.
The downturn has been attributed to the prevailing operating environment, which has been characterised by a weak global macroeconomic backdrop and persistent geopolitical and trade tensions.
These have undermined market confidence and consumer demand.
Analysts have flagged the group’s net debt as a key concern, with the group carrying $2 billion of interest-bearing debt.
The group has a market capitalisation of R8 billion, meaning a majority of its enterprise value is debt.
CEO Steve Binnie presented the joint venture as one way to address this.
Sappi’s share of equity-announced income from the joint venture is expected to improve its consolidated EBITDA relative to the standalone EBITDA of the Sappi Contributed Business over time.
The group will also receive a cash consideration as per the deal, which will enable it to reduce offshore debt. Cash dividends from the joint venture will help reduce debt in the long run, it said.
The Competition Commission has now given the company a nod for the plan, recommending that it be approved by authorities without conditions.
“The commission is of the view that the proposed transaction is unlikely to substantially lessen or prevent competition in any relevant markets,” it said.
The proposed transaction also does not raise significant public interest concerns, it added.
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