Kroton, Estacio Lead Gains on Ibovespa as Acquisition Eyed

  • News merger being studied fuels bets other deals may follow
  • Better-than-expected manufacturing report also buoys stocks

The Ibovespa rose for a second day as a possible merger between for-profit college managers Estacio Participacoes SA and Kroton Educacional SA fueled speculation that cheap asset prices may fuel other deals.

Ibovespa movers today
Ibovespa movers today

The university operators, the biggest in Brazil by market value, posted the best gains on the benchmark equity index Thursday after Kroton said it’s studying a bid to take over its smaller rival. A government report showing that manufacturing unexpectedly rose in April from a month earlier also buoyed stocks.

"The economic data shows that we may already have hit bottom, so the business environment is poised to improve," Raphael Figueredo, an analyst at the brokerage Clear Corretora, said from Sao Paulo. "The news regarding Kroton and Estacio is a positive indication of that."

The benchmark Ibovespa index rose 1.8 percent to 49,887.24 percent at the close of trading in Sao Paulo as 45 of its 59 stocks rose. Estacio jumped 24 percent and Kroton gained 14 percent.

"The merger would be a very interesting opportunity for both companies," Rafael Ohmachi, an analyst at brokerage Guide Investimentos, said from Sao Paulo.

Cia. Siderurgica Nacional SA led gains by steelmakers after the manufacturing report. Industrial output rose 0.1 percent in April, according to the national statistics agency. That surprised all but one of the 37 economists surveyed by Bloomberg, whose median forecast was for a 0.9 percent drop.

The real climbed 0.3 percent to 3.5910 per dollar, dimming the outlook for companies that depend on sales outside Brazil. Meatpacker JBS SA, which gets two-thirds of its sales in the U.S., declined 0.9 percent.

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