Ser Educacional Plans on New Offer for Estacio by Monday

  • Company said to work on better financial, governance terms
  • Kroton Educacional sweetened its bid for Estacio on Tuesday

Ser Educacional SA is working on a new proposal to acquire Estacio Participacoes SA with better financial and governance terms, trying to outbid a sweetened offer from Kroton Educacional SA.

Ser executives are meeting with adviser Credit Suisse Group AG and aim to present the new terms to Estacio on Sunday or, at the latest, Monday. Ser Chairman Janguie Diniz confirmed the discussions in a phone message after Bloomberg News reported the plans for a new bid earlier Wednesday. Estacio declined to comment.

Brazil’s for-profit education companies are fighting over Estacio, a company with a heavy concentration in the state of Rio de Janeiro, Brazil’s second biggest market. Acquiring Estacio would give Ser or Kroton more resources to weather Brazil’s toughest recession in at least a century.

A combination with Estacio would make sense for both Kroton and Ser, as Estacio is “in practical terms a hegemony” in Rio de Janeiro, said William Klein, chief executive officer at consultant Hoper Educacao. “Other players tried to get into Rio without success. So, to get into this market, acquiring Estacio is an important strategy.”

Kroton boosted its all-stock offer for Estacio by 28 percent on Tuesday to 5.21 billion reais ($1.54 billion). While Ser hasn’t provided full details of its original 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. Kroton’s offer valued Estacio at 16.41 reais a share as of Tuesday, 48 percent above Estacio’s price on June 1.

Estacio shares dropped 1.5 percent to 15.57 reais at 10:31 a.m. in Sao Paulo, while Kroton shares fell 2.5 percent to 13.44 reais and Ser shares fell 1.5 percent to 12.75 reais.

The news that Ser will boost its offer for Estacio was weighing on the shares because investors prefer an Estacio merger with Kroton, Jason Vieira, chief economist at Infinity Asset Management, said in a phone interview from Sao Paulo.

Estacio Chief Executive Officer Chaim Zaher is also discussing a merger with closely held Universidade Paulista, known as Unip, Exame magazine reported Tuesday, without saying how it got the information. Unip couldn’t be reached by Bloomberg for comment.

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