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Anhanguera Falls Most on Ibovespa With Kroton Deal at Risk

Anhanguera Educacional Participacoes SA sank the most on the Ibovespa as Kroton Educacional SA said the conditions imposed by Brazil’s antitrust regulator could derail the education companies’ merger plan.

The shares fell 1.6 percent to 12.51 reais at the close of trading in Sao Paulo, after erasing a gain of as much as 2.7 percent. Kroton climbed 4.7 percent to a record 46.90 reais.

Kroton proposed in April an all-stock deal valued at $2.1 billion to purchase Anhanguera and form the world’s biggest education company. Brazil’s antitrust regulator Cade said last week that the companies may have to sell some of their distance-learning schools to ensure that the industry remains competitive, a scenario that Kroton investor relations officer Carlos Lazar said could scuttle the deal.

“There is that chance,” Lazar said by phone today. “Depending on the conditions, it could mean a breach in the merger terms.”

Anhanguera has lost 16 percent this year, while Kroton has advanced 19 percent. Under the ratio of the stock swap proposal, Anhanguera’s shares would be worth 21.33 reais if the deal closed at current prices, data compiled by Bloomberg show. The companies said in a Feb. 28 statement that they wouldn’t change the terms of the deal even as Anhanguera’s shares dropped.

“Investors had been questioning the ratio of the stock swap, which was much more beneficial for Anhanguera,” Beatriz Nantes, an analyst at the equity research firm Empiricus in Sao Paulo, said by phone. “If Cade goes through with this recommendation, it doesn’t make sense for Kroton to accept it. They’re not going to want to sell one of those assets.”

Lazar said the deadline for Cade’s decision is June 13. He expects the decision on the merger in May or June.

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