UPM’s fateful moments: The Commission’s warning reveals a nasty alternative

The fears of the European Commission threaten to topple the forest giant UPM:n and a South African Sappi Limited plan for a common European paper company.

The Commission has given the companies a so-called statement of objections. It is an official warning in which the authority states its preliminary concerns and may impose conditions to preserve fair competition.

The deal worth more than 1.4 billion has not collapsed yet. Next, UPM and Sapp must present how they plan to combat the authority’s concerns that the arrangement would reduce competition in the industry too much in Europe.

Key means can be, for example, reducing production capacity by selling some factories or machines.

The paper prints the print

When the deal was announced, the companies estimated that the joint venture would bring annual savings of approximately 100 million euros through the enhancement of production, product selection and logistics.

Herein lies the crux of the problem. In the fiscal year 2025, which ended in September 2025, Sappi Limited had a turnover of approximately 5.4 billion dollars, but net losses of as much as 177 million dollars.

One of the main reasons for the negative result was the decrease in demand for graphic paper in Europe and the generally weak market situation.

The result was also reduced by the low price of pulp, cost pressures and maintenance shutdowns, as well as unfavorable exchange rate conditions.

UPM’s turnover in 2025 was approximately EUR 9.7 billion and the comparable operating profit was EUR 921 million. The result was at a modest level, about 25 percent below the previous year.

We want to turn the stones

It is possible that the new conditions are such that for one or both of the parties to the transaction, the desired synergistic benefits will no longer materialize after them.

In this case, companies may end up abandoning the arrangement themselves. It is difficult to say how big concessions would be required from UPM and Sapp in the end.

There is still good reason to believe that the companies are working side by side to find solutions that the EU Commission can accept, even if the synergies are somewhat less than originally anticipated.

Production of graphic paper continues to decline. A joint arrangement would be a clear improvement for both compared to fighting against windmills alone.

Many have actually guessed that the arrangement in question, if realized, would be the first step for both of them towards giving up the paper business. If the arrangement planned now does not work out, that day may be closer than we think.