(Adds EU Commission no comment, details)
By Foo Yun Chee and Jussi Rosendahl
BRUSSELS/HELSINKI, May 21 (Reuters) - Finnish paper firm Ahlstrom is set to secure European Union approval for the merger of its label unit with Munksjo to form the world No. 1 speciality paper maker after agreeing to sell a German business, a person familiar with the matter said on Tuesday.
Ahlstrom said earlier this month that it would divest its sandpaper backings and pre-impregnated wallpaper businesses to address EU regulatory concerns over the deal with Sweden’s Munksjo.
The EU competition regulator opened an investigation into the deal in December last year to look at whether the combined unit would have too much market power in Europe and worldwide.
“The European Commission will approve the deal. Ahlstrom will transfer two of three paper machines to a buyer,” said the source, who declined to be identified because of the sensitivity of the issue.
Ahlstrom Chief Executive Jan Lang declined to comment about EU regulatory approval for the deal, but told Reuters the group hoped to get the green light before May 27.
Missing that date would require a new shareholder meeting and other steps that would delay agreement by several weeks.
Lang said it was likely Ahlstrom would have between six and 12 months to find a buyer for the German asset.
European Commission spokesman for competition policy Antoine Colombani declined to comment.
Swedish buyout firm EQT is the principal owner of Munksjo. (Reporting by Foo Yun Chee in Brussels and Jussi Rosendahl in Helsinki; editing by Luke Baker, Rex Merrifield and Jane Merriman)