Kroton Lifts Estacio Bid; Ser Says It’s Still in the Hunt

  • Terms provide 48% premium to Estacio’s June 1 closing price
  • Kroton, Ser Educacional making competing bids for company

Kroton Educacional SA boosted its offer to acquire Estacio Participacoes SA by 28 percent to 5.21 billion reais ($1.54 billion), seeking victory in a bidding war among Brazil’s biggest for-profit education companies. Rival suitor Ser Educacional SA said it’s continuing to talk with Estacio.

Under the latest proposal, investors would receive 1.25 shares of Kroton for each Estacio share they now own, Kroton said in a regulatory filing Tuesday. That values Estacio at 16.41 reais a share, 48 percent above its price on June 1, before Kroton disclosed plans to buy its competitor.

Kroton and smaller rival Ser Educacional made competing bids for Estacio a few days apart earlier this month, as the for-profit education companies struggle with Brazil’s deepest recession in at least a century. While Ser didn’t provide full details of its proposal, including a per-share price, investor relations officer Rodrigo Alves said on a June 6 call that its plan represented a 9 percent premium over Estacio’s June 1 closing price.

Ser is negotiating with Estacio on a daily basis and said its proposal will add more value in the long term, Alves said in a phone interview today.

“We believe this is a long negotiation and Estacio shareholders are weighing their decision,” Alves said. “We have a very close relationship with Estacio and we realize Kroton can’t achieve the same level of dialogue.”

Kroton rose 5 percent to 13.79 reais in Sao Paulo while Estacio climbed 2.3 percent to 15.80 reais. Ser Educacional advanced 3.4 percent to 12.94 reais.

Ownership Breakdown

Under the new offer, Kroton shareholders would own about 81 percent of the combined company, and Estacio the remaining 19 percent. Ser’s offer would give Estacio holders 69 percent of the combined company, with its own shareholders having the rest, according to a filing earlier this month.

Estacio confirmed it received Kroton’s new proposal in a filing and said it will analyze the new terms.

“We understand that speed and caution are crucial for the operation to be executed,” Kroton said in its filing. “The offer is valid until June 30, 2016, and will automatically be revoked after that date, unless extended in writing by Kroton’s management.”

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