UPM says it can address competition concerns raised by the European Commission over its planned €1.42 billion graphic paper joint venture with Sappi, keeping one of the largest restructurings of Europe's paper industry on course despite a deeper regulatory challenge.

The European Commission has issued a Statement of Objections to UPM and Sappi over their proposed combination of graphic paper operations, formally setting out concerns identified during its ongoing merger investigation.

UPM confirmed receipt of the statement on 26 August and said it would examine the Commission's objections together with Sappi. The Finnish group maintains that the issues can be resolved and continues to argue that combining the businesses is necessary to maintain a viable European graphic paper supply base.

The move follows the Commission's decision in April to open a Phase II investigation after its initial review failed to resolve competition concerns.

The Statement of Objections does not amount to a prohibition of the transaction. It gives UPM and Sappi an opportunity to respond to the Commission's preliminary findings and potentially propose remedies before a final decision.