UPM and Sappi have received a Letter of Facts from the European Commission stating that it continues to have serious concerns about the proposed graphic paper Joint Venture. The parties are in the process of analyzing and responding to the Letter of Facts.

UPM disagrees with the Commission's preliminary assessment and will continue to engage with the review process. UPM continues to believe that the proposed Joint Venture would support the long-term competitiveness, sustainability and resilience of the European graphic paper industry. To address the Commission’s concerns, the parties are planning to submit proposals for specific remedies, but given the rationale of the transaction, not divestments.

The proposed Joint Venture is being assessed at a time when the European Commission is updating its approach to competition policy to better reflect Europe’s changing economic and strategic environment in a more fragmented world. The Commission leadership has rightly called for merger assessment which – besides safeguarding effective competition – would give appropriate weight to resilience, innovation and investment as well as longer-term market dynamics. That direction is now reflected in the Commission’s draft revised Merger Guidelines published on April 30, 2026.

A dynamic, forward-looking approach in merger control review is particularly critical in structurally declining markets. Due to digitalization, the demand for graphic paper in Europe has more than halved over the past two decades and is projected to decline further in the coming years. The proposed Joint Venture represents a rational response to these market realities and would enable a more orderly adjustment of industry capacity while maintaining reliable customer supply and generating significant efficiencies.

Without the Joint Venture, the outlook for the European graphic paper industry is likely to become increasingly challenging: European producers would be under increasing pressure, accelerating further capacity closures in a manner which would make customers dependent on imports already in the short term due to drastically narrowed paper grade portfolios. Continued market decline and overcapacity would make it increasingly difficult to maintain a competitive and reliable European supply base.

UPM and Sappi announced the planned Joint Venture in 2025 and signed the definitive agreement on the transaction in May 2026. The transaction requires among other conditions merger control approvals, and most jurisdictions, including China, South Africa and the U.S., have already approved the transaction. The European Commission’s final decision is expected by year-end or shortly thereafter. The Joint Venture would become operational upon closing.