New Ser Bid Heats Up Monthlong Battle to Buy Brazil’s Estacio

  • Brazilian education companies aiming for merger amid recession
  • Offer made by larger rival Kroton set to expire Thursday

Ser Educacional SA increased its offer to merge with Estacio Participacoes SA, heating up a bidding war the day before a proposal by larger rival Kroton Educacional SA is set to expire.

Ser said Estacio holders would get a special dividend payment of 1 billion reais ($307 million) if they accept a non-cash deal that lets Ser absorb Estacio. That payout, equivalent to 3.25 reais per share, is a 69 percent increase from the dividend it proposed earlier this month, according to a regulatory filing Wednesday. The company reiterated Estacio would own 68.7 percent of the combined entity. Ser shareholders would hold the rest, but would get to appoint the chief executive officer of the combined company.

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, as they try to weather the toughest recession in at least a century. Last week, Kroton boosted its all-stock offer for Estacio by 28 percent. At the same time, a group of top Estacio shareholders, the Zaher family, is considering an offer to acquire a majority stake of the company.

It’s difficult to compare Estacio’s proposal to Kroton’s because Estacio hasn’t provided specific details of how the transaction would work. Kroton is offering 1.25 shares for every Estacio share. With Wednesday’s trading, that would value Estacio at 16.98 reais a share, or 5.39 billion reais. Estacio rose 4.2 percent to 16.67 reais at 10:24 a.m. in Sao Paulo. The shares are up 53 percent since June 1, the last day of trading before the bidding war became public.

Kroton’s offer is valid until Thursday and will automatically be revoked after that date. Ser said Estacio shareholders have until July 8 to accept its proposal. The Zaher family said it will decide in the next 20 days whether to make a bid for control of Estacio.

The Zaher family, which owns 14.1 percent of Estacio, may seek to buy about 36 percent of the company, according to a filing Monday. The Zahers haven’t determined an offer price and would seek no more than 75 percent of the company so it would remain publicly traded, Estacio said. The family includes Estacio CEO Chaim Zaher, a former board member who replaced Rogerio Melzi in the top post after talks began with Kroton and Ser this month.

The Zahers aren’t pleased with either bid and have also expressed a desire for Estacio to make an acquisition of its own, Folha newspaper reported Sunday, without saying where it got the information. On Wednesday, newspaper Estado de S. Paulo said the family is securing funds to make its own bid if offers from Kroton and Ser Educacional don’t value Estacio correctly, citing an unidentified person with direct knowledge of the matter.

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