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You must be playing the

Teutonic Campaign

When playing as Denmark, it is possible for you to form the Union of Kalmar. In order to do this you must first take the Scandinavian settlements of Kalmar, Göteborg, Visby, Uppsalaand Åbo. After taking control of these settlements you must then kill the Norwegian king, either through assassination or a direct battle. Note that if you eliminate the entire Norway faction it is impossible to form the union. After forming the union, Denmark will take on a new banner, gain access to all the existing settlements and armies of Norway, and unlock the ability to build three new units.

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Q: In Medieval 2 Total War how does Denmark become the Union of Kalmar?
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