Brazil: CADE may veto education merger

Brazil’s antitrust regulator, Cade, is considering vetoing next week the merger of the country’s two largest for-profit education firms, Kroton Educacional and Estácio Participações.

Cade will meet next Wednesday to give a final ruling, but only one of the agency’s five directors, Cristiane Alkmin, has given signs that the deal could be approved, two newspapers said, citing unidentified sources close to the discussions.

A preliminary report in February by the watchdog’s economic studies department said the deal could hamper competition and lead to higher costs for consumers.

Cade has already been demanding divestitures larger than initially expected, such as the possible divestment of college brand Anhanguera Educacional, before approving the merger, sources had reported earlier in the month.

Shares of Estácio Participações fell 7.1 percent on Tuesday on fears the deal could be blocked and Kroton’s shares dropped 3.9 percent.

The US$1.7 billion Kroton bid was approved by Estácio’s shareholders almost a year ago.

If Cade orders the companies to sell assets equivalent to more than 25 percent of total revenue, one clause in the merger agreement allows the parties to undo the deal without penalties according to an anonymous source.

Full Content: Reuters

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