Following the announcement that Sappi and UPM would join forces in December 2025, the two companies have signed a definitive agreement regarding its graphic paper venture
UPM has today [May 28th, 2026] confirmed that it has signed a definitive agreement to form its Joint Venture with Sappi regarding distribution of graphic paper throughout Europe.
Both parties have secured financing arrangements which UPM says will provide a robust financial standing for the Joint Venture. A non-binding letter of intent (LOI) by UPM and Sappi was signed on December 4th, 2025.
The announcement in December detailed the plan for UPM Communication Papers and Sappi’s graphic paper business to combine into a 50/50 agreement. The Joint Venture will operate as an independent company, managing its own operations, resources, and decisions withing agreed shareholder boundaries.
According to UPM, the two businesses have secured €600m (£520m) of external financing for the transaction, as well as a committed revolving credit facility of €100m (£87m) to finance the operational liquidity needs of the Joint Venture.
At the closing of the transaction, the Joint Venture will raise the agreed debt to fund the cash consideration payable to UPM and Sappi respectively. Both parties have reportedly agreed that a part of the purchase price will be financed through shareholder loans to ensure a adequate balance sheet and equity.
Following the closing, except for shareholder loans, UPM says the Joint Venture will be independently financed, and will not affect shareholders if the venture requires additional funding.
Massimo Reynaudo, president and chief executive officer of UPM, comments: “The definitive agreement is an important milestone in creating the planned Joint Venture that we see as a necessary step to secure long-term commitment and supply continuity for graphic paper customers in Europe and strengthen the resilience of the entire European graphic paper industry.”
As originally explained, the definitive agreement means that Sappi and UPM will contribute their respective businesses and assets to the Joint Venture with a combined enterprise value of €1,420m (£1,230m), excluding the value of expected synergy benefits. UPM Communication Papers business is valued at €1,100m (£953m), while Sappi’s European business is valued at €320m (£277m) [both valuations are based on enterprise value].
In its communication on the signed agreement, UPM states: “As consideration for its assets contributed to the planned Joint Venture, at closing UPM will receive cash proceeds of €475m (£412m), a receivable for a shareholder loan on preferential terms valued at €88m (£76m), a receivable for an additional shareholder loan valued at €10m (£9m) and 50% of the equity of the Joint Venture equal to a book value of €167m. As part of the transferring business perimeter, €411m of net pension and other liabilities based on year-end 2025 balance sheet will transfer to the Joint Venture.”
UPM has also confirmed Sappi will receive cash proceeds of €90m, a receivable of a shareholder loan valued at €10m and 50% of the equity of the Joint Venture equal to a book value of €167m (£145m). The company has also prefixed that the purchase prices, cash proceeds, and financial impact of the transaction are estimates and subject to customary purchase price adjustments.
According to UPM the transaction is expected to have a positive impact on UPM’s profitability margins (EBIT % of sales), balance sheet, and leverage, especially as it benefits from the sale to the Joint Venture via cash payment and shares.
The company also believes it will achieve a more focused business portfolio, operating on growth markets, and would no longer have direct sales exposure to the declining European and Noth American graphic paper markets.
Communication from UPM does emphasise that the transaction requires approval by Sappi shareholders and is also subject to merger control by the European Commission and authorities in areas like the US and China. Final resolutions are expected by the end of 2026 at which point the Joint Venture would be operational upon closing.
As announced on April 28th, 2026, the review of the Joint Venture proceeded to Phase II of EU merger control. UPM says it continues to engage openly and constructively with the European Commission during the second part of the process.
