UPM-Kymmene Corporation Stock Exchange Release (Inside Information) December 4,
2025 at 11.45 EET
Inside information: UPM and Sappi have signed a non-binding letter of intent to
form a graphic paper Joint Venture
UPM-Kymmene Corporation (“UPM”) and Sappi Limited (“Sappi”) have signed a non
-binding letter of intent to form a graphic paper joint venture (“the Joint
Venture”). The Joint Venture would include the entire UPM Communication Papers
business and Sappi's graphic paper business in Europe. The Joint Venture would
be owned 50/50 by UPM and Sappi. It would operate as an independent company,
managing its own operations, resources, and decisions within agreed shareholder
boundaries.
"The proposed Joint Venture represents a decisive response to the structural
changes in the European graphic paper industry. It would offer a path to
strengthen the resilience of the industry and provide long-term commitment and
supply security to graphic paper customers," says Massimo Reynaudo, President
and CEO of UPM.
“UPM Communication Papers has reliably delivered value to customers as well as
UPM shareholders. It has been the foundation upon which UPM has expanded its
broad portfolio of sustainable material solutions. The planned Joint Venture
would provide the best future for the UPM Communication Papers business, focus
UPM's portfolio and strengthen our balance sheet,” says Reynaudo.
Securing long-term resilience and sustainability
The transaction would create a more efficient, adaptable and sustainable graphic
paper business. It would create a structurally competitive cost base and supply
security for the European and global customers.
By strategic reallocation of production volumes to the most efficient paper
machines, the Joint Venture would achieve more sustainable capacity utilization
and stronger operational performance, while continuing to serve customers with a
broad portfolio of graphic paper products.
Overall, the Joint Venture would rationalize supply in an industry burdened by
declining demand, structural overcapacity and high energy costs. It would
contribute to a more balanced and resilient European market, and make the
industry better positioned to withstand market challenges and increasing imports
to Europe.
UPM Communication Papers has already today an ambitious climate action roadmap
to reduce product emissions by up to 70% by 2030, supporting customers in
achieving their climate targets. The Joint Venture would further enhance these
opportunities. By optimizing capacity utilization, enhancing operational
efficiencies and continuing to invest in decarbonization, the Joint Venture
could reduce its overall climate impact, helping to advance the EU's Clean
Industrial Deal objectives.
Transaction overview and terms
The proposed Joint Venture would be owned 50/50 by UPM and Sappi and operate as
an independent company.
The planned perimeter of the Joint Venture would include:
- The entire UPM Communication Papers business, including eight UPM
Communication Papers' paper mills at Kymi, Rauma (including UPM RaumaCell) and
Jämsänkoski (paper line 6) in Finland; Nordland (paper lines 1 and 4), Augsburg,
Schongau in Germany; UPM Caledonian paper mill in the UK and Blandin paper mill
in the USA; and
- Sappi's European graphic paper business, including the following four
graphic paper mills: Kirkniemi in Finland, Ehingen in Germany, Gratkorn in
Austria and Maastricht in the Netherlands.
The Joint Venture is expected to create annual synergies estimated at about €100
million through asset optimization, product portfolio rationalization, logistics
optimizations, sourcing efficiency improvements and operational efficiencies.
Based on the letter of intent
- UPM and Sappi would contribute their respective businesses and assets
to the Joint Venture with a combined enterprise value of €1,420 million,
excluding the value of expected synergy benefits.
- UPM Communication Papers business is valued at €1,100 million
(enterprise value). UPM would receive cash proceeds of €613 million and 50%
shareholding in the Joint Venture.
- Sappi's European business is valued at €320 million (enterprise
value). Sappi would receive cash proceeds of €139 million and 50% shareholding
in the Joint Venture.
At the closing of the transaction, the Joint Venture would raise debt to fund
the purchase prices payable to Sappi and UPM respectively. The Joint Venture
would be independently financed and to the extent it would require additional
funding in the future, it shall be without any recourse to the shareholders.
The Joint Venture would distribute dividends to its two shareholders according
to its financial performance and standing.
The establishment of the Joint Venture would create a sustainable standalone
business that ultimately will provide divestment flexibility for both
shareholders. Three years after closing, with the Joint Venture expected to have
completed the integration and realized the synergies, either shareholder may
initiate a divestment of their shareholding.
Impact of the transaction on UPM financials
The financial benefit for UPM at closing would include the €613 million cash
payment to UPM by the Joint Venture, €406 million transfer of pension
liabilities to the Joint Venture and UPM's share (50%) of the Joint Venture. The
valuations and financial impact of the transaction are estimates at the time of
the letter of intent, and subject to customary adjustments.
The valuation of UPM Communication Papers business at €1.1 billion is equal to a
multiple of 4.6x EBITDA of last reported 12 months (Q4/2024-Q3/2025).
The UPM Communication Papers assets to be transferred to the Joint Venture
represent less than 10% of UPM's total assets.
The ownership in the Joint Venture would be accounted for using the equity
method.
The transaction is expected to have a positive impact on UPM's profitability
margins (EBIT % of sales), balance sheet and leverage. UPM would also achieve a
more focused business portfolio operating on growth markets and would no longer
have direct sales exposure to the declining European and North American graphic
paper markets.
The table below summarizes the key figures of UPM Group and UPM Communication
Papers, and UPM Group excluding the UPM Communication Papers.
€ million UPM UPM UPM excl. UPM Communication Papers
Group Communication
Papers 2024
2024
2024
Sales 10,339 2,953 7,902
Comparable 1,734 344 1,390
EBITDA
% of sales 16.8 11.6 17.6
Operating 604 190 414
profit
% of sales 5.8 6.4 5.2
Comparable 1,224 273 951
EBIT
% of sales 11.8 9.3 12.0
Capital 15,452 1,125 14,328 1)
employed
Comparable 8.2 23.8 7.0
ROCE, %
€ million UPM UPM UPM excl. UPM Communication Papers
Group Communication
Papers Q4 2024-Q3 2025
Q4 2024
-Q3 Q4 2024-Q3
2025 2025
Sales 9,976 2,602 7,843
Comparable 1,365 241 1,124
EBITDA
% of sales 13.7 9.3 14.3
Operating 255 30 225
profit
% of sales 2.6 1.1 2.9
Comparable 984 180 804
EBIT
% of sales 9.9 6.9 10.3
Capital 14,292 986 13,306 1)
employed
Comparable 6.9 16.9 6.1
ROCE, %
1) excl. UPM Communication Papers operating capital employed
The tables show UPM key figures as reported and excluding UPM Communication
Papers. The figures do not include the impact of forming the joint venture, any
transaction costs, synergies or dis-synergies or project costs.
Transaction subject to merger control and other conditions
Negotiations regarding the details of the Joint Venture are ongoing, and the
parties expect the definitive agreements to be signed during the first half of
2026. The definitive agreements require the completion of external financing
agreements, Sappi shareholder approval and other conditions.
The proposed transaction is subject to review by the European Commission and the
relevant merger control and approval by the authorities in other jurisdictions
such as the US, UK and China. The parties are committed to working with the
regulatory authorities throughout the review process.
It is currently expected that the closing would take place by the end of 2026,
subject to regulatory approvals and other closing conditions. The Joint Venture
would become operational upon closing.
UPM Communication Papers and Sappi's European graphic paper business will
continue to operate as separate and independent companies and manage their
respective businesses until the closing of the intended Joint Venture according
to the satisfaction of all legal and regulatory requirements.
Invitation to UPM's webcast
A webcast and a conference call for analysts and investors will begin at 14:00
EET. There will be a presentation in English by President and CEO Massimo
Reynaudo and CFO Tapio Korpeinen. Participants can follow the webcast online via
this link (https://upm.events.inderes.com/2025-12-04-webinar/register).
Participants wishing to ask questions after the presentation must register for
the conference call. To participate in the conference call, please register
here (https://events.inderes.com/upm/2025-12-04-webinar/dial-in). After
registering, you will be provided with telephone numbers, a user ID and a
conference ID to access the call. To ask a question, press *5 on your telephone
keypad to join the queue.
The webcast will be available at www.upm.com for 12 months after the call.
UPM, Media relations
Mon-Fri 9:00-16:00 EET
tel. +358 40 588 3284
media@upm.com
UPM
UPM is a material solutions company, renewing products and entire value chains
with an extensive portfolio of renewable fibres, advanced materials,
decarbonization solutions, and communication papers. Our performance in
sustainability has been recognized by third parties, including EcoVadis and the
Dow Jones Sustainability Indices. We operate globally and employ approximately
15,800 people worldwide, with annual sales of approximately €10.3 billion. Our
shares are listed on Nasdaq Helsinki Ltd.
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