Anhanguera Falls With Kroton as Regulator Signals Limits to Deal

Anhanguera Educacional Participacoes SA (AEDU3) and Kroton Educacional SA (KROT3) sank after Brazil’s antitrust regulator indicated that the education companies may have to sell some schools before their merger is approved.

Anhanguera declined 2.3 percent to 12.65 reais at 12:09 p.m. in Sao Paulo, the lowest level on a closing basis since Feb. 27. The company extended its decline this year to 15 percent. Kroton lost 2.1 percent to 43.38 reais, snapping a three-day winning streak. The Ibovespa (IBOV) slipped 0.5 percent.

A preliminary assessment from Brazil’s antitrust regulator, known as Cade, showed that the companies may have to sell some of their long-distance schools to ensure that the industry remains competitive, Anhanguera and Kroton said in a joint statement yesterday. Kroton offered in April 2013 to buy Anhanguera in an all-stock deal valued at 5 billion reais ($2.1 billion) that would form the world’s biggest education company by market value.

The deal between the two companies is “impractical” if no restrictions are imposed, according to a statement from Cade attorney’s office last week.

Under the ratio of the stock swap proposal, Anhanguera’s shares would be worth 19.70 reais if the deal closed at current prices, data compiled by Bloomberg show. The companies said in a Feb. 28 statement that they won’t change the terms of the deal even as Anhanguera’s shares drop.

The findings of Cade attorneys’ office will be presented to the regulator’s board, which will have final say on the merger. Board member Ana Frazao said late last year that a decision may be announced by June.

To contact the reporter on this story: Ney Hayashi in Sao Paulo at

To contact the editors responsible for this story: Brendan Walsh at Dennis Fitzgerald, Richard Richtmyer

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