Exclusive-EU antitrust regulators set to block UPM-Sappi merger, sources say

BRUSSELS, Sept 18 (Reuters) - Finland's UPM-Kymmene and South Africa-listed Sappi <SAP.J> are set to face an EU antitrust veto against their proposed €1.42 billion ($1.66 billion) paper joint venture after the companies declined to offer concessions to address competition concerns, people familiar with the matter said. 

The companies also failed to convince regulators of the merits of their deal at a closed-door hearing earlier this week even after they argued about the sustainability and resilient impact of the deal, one of the people said.

Difficulties finding a buyer for any potential asset sales mean it is not an option.

The European Commission, which acts as the EU competition enforcer did not immediately respond to a request for comment. UPM and Sappi declined to comment.

The EU watchdog sent a charge sheet to the companies last month saying that the deal may reduce competition in the markets for different types of communication paper used for magazines and books.

The deal, which would combine UPM's communication paper business in Europe and the US with Sappi’s communication paper business in Europe and speciality paper business and other ancillary activities, would create the biggest player in Europe.

Regulators, who will decide on the deal by November 11, also warned the combined entity could jack up prices.

(Reporting by Foo Yun Chee; Editing by Inti Landauro and Louise Heavens)