Commission opens in-depth investigation into proposed joint venture between UPM and Sappi

The European Commission has opened an in-depth investigation to assess, under the EU Merger Regulation, the proposed creation of a joint venture between UPM-Kymmene Corporation ('UPM') and Sappi Limited ('Sappi'). The Commission is concerned that the transaction may reduce competition in certain markets for the production and supply of communication paper and specialty paper in the European Economic Area ('EEA') and result in higher prices, less choice or reduced quality.

Communication paper is used for newspapers, magazines, books and office paper, amongst others. Specialty paper is used for specific applications such as self-adhesive paper and labels.

UPM and Sappi are the two largest manufacturers of communication paper products in the EEA. The joint venture could create the EEA market leader combining UPM's communication paper business in Europe and the US, with Sappi's communication paper business in Europe, part of Sappi's specialty paper business, and supporting businesses including pulp production and energy generation.

The Commission's preliminary concerns

The preliminary investigation indicates that the transaction may reduce competition in the markets for the production and supply of (i) magazine paper, in particular coated mechanical ('CM') paper and (ii) fine paper, in particular wood free coated ('WFC') paper in the EEA. In addition, the transaction raises preliminary concerns as regards certain specialty paper markets, specifically for the production and supply of (iii) coated-one-side paper-based face material ('C1S face material') and (iv) pressure-sensitive labels ('PSL') in the EEA, due to vertical and spill-over effects.

In particular, the Commission preliminarily found that for magazine paper and fine paper:

• UPM and Sappi are major suppliers in the CM and WFC markets and the joint venture would control a significant portion of production capacity in the EEA.
• UPM and Sappi are each other's main rivals in the markets for the production and supply of CM paper and WFC paper in the EEA.
• Rivals would not have the ability or the incentive to offset any price increases by the joint venture.

Consequently, the transaction could result in a reduction of production capacity in those markets, along with higher prices and lower quality of CM and WFC paper for customers, which include printers and publishers.

In addition, UPM and Sappi are close competitors in the production and supply of C1S face material. Following the transaction, both UPM and Sappi would retain activities in C1S face material and would compete with the joint venture. The Commission will examine whether the transaction would reduce competition in the C1S face material market and whether the companies could coordinate their activities after the proposed transaction.

Finally, following the transaction, UPM would continue to be active in the market for PSL, which relies on C1S face materials as a key input. The Commission will examine whether, as a result of the transaction, the joint venture would have the ability and the incentive to restrict the access of competing PSL suppliers to C1S face material.

The Commission will now carry out an in-depth investigation into the potential effects of the transaction to determine whether its initial competition concerns are confirmed.

During its in-depth investigation, the Commission will continue to assess the benefits the companies claim the transaction would bring, namely in terms of cost efficiencies, environmental benefits, and a more resilient European paper industry, and whether these benefits would offset any potential harm created by the transaction.

The proposed transaction was notified to the Commission on 19 March 2026. The Commission now has 90 working days, until 26 October 2026, to take a decision.

The opening of an in-depth investigation does not prejudge its outcome.

Companies and products

UPM-Kymmene Corporation ('UPM'), headquartered in Finland, is a global material solutions company that develops, produces and markets, among others, paper products, pulp, electricity, label stock and sawn timber, as well as biochemicals, biomass and plywood solutions.

Sappi Limited ('Sappi'), headquartered in South Africa, is a global manufacturer of everyday materials made from woodfibre-based renewable resources. Sappi supplies raw materials (pulp and biomaterials) as well as end-use products, including communication, specialty, and packaging paper. Sappi's communication paper business is headquartered in Europe.

Merger control rules and procedure

The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the EU Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.

The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).

In addition to the current transaction, there are currently two ongoing phase II merger investigations: the proposed acquisition of Anglo American's nickel business by MMG and the proposed acquisition of joint control over TERCAT by TIL and Hutchison Ports.

More information will be available on the Commission's competition website, in the public case register under the case number M.12270.