EU Antitrust Regulators Expected to Block UPM-Sappi Graphic Paper Joint Venture

European Union antitrust regulators are expected to block a proposed €1.42 billion joint venture between UPM-Kymmene and Sappi that would combine parts of the companies’ graphic paper businesses, according to Reuters sources.

The European Commission has raised concerns that the transaction could significantly reduce competition in markets for communication papers used in magazines, books and other printed materials. The proposed combination would create the largest player in the European communication paper sector.

The companies have not offered remedies to address the Commission’s competition concerns, according to the Reuters report. Sources said efforts to identify potential buyers for assets that could have been divested have also encountered difficulties.

The Commission issued a Statement of Objections to UPM and Sappi on August 26 after an in-depth investigation. It said the proposed joint venture could give the combined business greater market power in coated mechanical paper and coated wood-free paper, potentially allowing it to increase prices or reduce quality.

The companies have argued that the transaction could provide benefits including greater supply stability, resilience and efficiencies. The Commission said it was not yet convinced that such benefits would offset its competition concerns.

UPM and Sappi were given an opportunity to respond to the Commission’s objections and request an oral hearing. The issuance of a Statement of Objections does not itself determine the outcome of the investigation.