Sappi, UPM propose $1.65B graphic paper joint venture

Core Insights - Sappi Ltd. and UPM-Kymmene Corp. plan to form a joint venture in Europe for graphic paper, valued at approximately 1.42 billion euros ($1.65 billion) [1][3] - The joint venture aims to enhance profitability amid a decline in demand for graphic paper in Europe, alongside challenges such as overcapacity and rising input costs [3][4] Group 1: Joint Venture Details - A non-binding agreement has been signed, with definitive agreements expected in the first half of 2026 and a target closure by the end of next year, subject to regulatory and shareholder approval [2] - The joint venture will not be listed on any stock exchange [2] Group 2: Market Context - The European graphic paper industry is facing a "sustained structural decline in demand," exacerbated by rising wood and energy costs due to geopolitical tensions, particularly the war in Ukraine [3][4] - The joint venture is seen as a strategic move to consolidate and rationalize the industry, aiming for a more stable and resilient business model [4] Group 3: Financial Implications - Expected operational synergies from the joint venture are projected to reach at least 100 million euros ($116.5 million) annually, leading to improved profitability and cash flow generation [5] - Sappi's business is valued at 320 million euros ($372.7 million), while UPM's business is valued at 1.1 billion euros ($1.28 billion) [5]