Kroton's $3.4 Billion Purchase of Anhanguera Approved

Brazil’s antitrust regulator approved Kroton Educacional SA (KROT3)’s $3.4 billion purchase of Anhanguera Educacional Participacoes SA (AEDU3), cementing its position as the world’s biggest for-profit education company.

In order to get the green light, Kroton agreed to sell part of Grupo Uniasselvi, which it bought in 2012, and other unspecified assets in three cities, freeze some enrollment and suspend expansion of certain courses, Vinicius Carvalho, head of the regulator, known as Cade, said in Brasilia today.

“We needed a solution that would allow competitors to dispute their leadership,” Ana Frazao, the Cade member responsible for the case, told reporters in Brasilia. “The companies will have to sell Uniasselvi, because the biggest issues were on long-distance courses.”

The all-stock merger, the result of a year of negotiations, will create a company with more than 1 million students in universities, post-graduate classes and long-distance courses.

Next Step

Kroton Chief Executive Officer Rodrigo Galindo already has his sights set on new acquisitions in Brazil over the next two to three years, he said in a conference call yesterday. After that, he’ll consider looking abroad.

The merger should close within two months, Carlos Lazar, Kroton investor relations director, said.

The deal was renegotiated earlier this month, after the premium for Anhanguera shares surged to 64 percent from less than 1 percent when the deal was announced in April 2013. Kroton will swap 0.3097 of its common shares for every Anhanguera share, down from an original ratio of 0.4548, according to a regulatory filing on May 7. Based on Kroton’s closing share price of 55.79 reais, that values Anhanguera at 7.5 billion reais.

Shareholders of Anhanguera, based in Valinhos, Brazil, will hold 33.5 percent of the new company, while Kroton shareholders will hold 66.5 percent.

Kroton has more than quintupled and Anhanguera has almost doubled since 2010 when the government loan program known as Fies was reformulated and began offering lower interest rates on student loans. That prompted students who hadn’t previously had access to education to sign up for college.

To contact the reporters on this story: Mario Sergio Lima in Brasilia Newsroom at mlima11@bloomberg.net; Christiana Sciaudone in Sao Paulo at csciaudone@bloomberg.net

To contact the editors responsible for this story: Telma Marotto at tmarotto1@bloomberg.net Molly Schuetz, John Lear

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