Brazil: Kroton eyes Estacio for $968 million education merger

Kroton Educacional SA, Brazil’s biggest for-profit education company, is studying a bid to acquire its largest rival, Estacio Participacoes SA, for 3.48 billion reais in stock.

Estacio surged the most in more than seven years in Sao Paulo trading, climbing 22 percent to as high as 13.55 reais. It was up 15 percent to 12.73 reais at 11:21 a.m. Kroton gained as much as 12 percent to 12.50 reais, the most since October.

Investors would get 0.977 share of Kroton for each share they hold in Estacio, according to a filing. Kroton’s proposal wouldn’t represent a premium for Estacio, which was valued at 3.5 billion reais at the close of trading Wednesday. Kroton has a market value of 18.2 billion reais and had 574 million reais in cash and equivalents at the end of March, according to data compiled by Bloomberg.

Estacio had no immediate comment. Kroton hired Itau BBA and Barbosa Mussnich Aragao as advisers on the bid and said it isn’t in talks with Estacio.

Such a combination would add Estacio’s 600,000 students to Kroton’s base of 1 million. Kroton has been on an acquisition spree over the past six years, spending 10.8 billion reais in a deeply fragmented market. Brazil has four other major private higher-education players: Gaec Educacao SA and Ser Educacional SA, which trade on the Sao Paulo stock exchange, and Devry Education Group Inc. and Laureate Education Inc., which are based in the U.S. Additionally, there are 2,300 small universities spread around the country.

Full Content: Bloomberg

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