UPM and Sappi plan graphic paper joint venture in Europe

Finnish forestry firm UPM-Kymmene UPM and South Africa-listed wood fibre group Sappi SAP have signed a non-binding preliminary agreement to form a graphic paper joint venture, UPM said on Thursday.

The new company would operate independently and include UPM's Communication Papers unit and Sappi's graphic paper business in Europe, the Finnish group said in a statement.

The venture would have a combined value of 1.42 billion euros ($1.66 billion), excluding potential cost benefits, of which 1.10 billion euros would be attributable to UPM's part of the business and 320 million euros to Sappi, as outlined in the letter of intent.

Under the agreement, both companies would own a 50% stake in the joint venture, with UPM receiving additional cash proceeds of 613 million euros and Sappi getting 139 million euros, UPM said.

UPM's shares rose 3.6% in Helsinki following the announcement. Johannesburg-listed shares of Sappi were up 7.8% at 1020 GMT.

($1 = 0.8568 euros)