(Adds Kroton comments in paragraphs 5-6)
SAO PAULO, March 17 Brazilian for-profit
education company Estácio Participações SA denied a
report on Friday that top managers were attempting to boycott a
sale to larger rival Kroton Educacional SA, the
latest hurdle to a deal that would create the sector's global
In a securities filing, Estácio said Chief Executive Officer
Pedro Thompson was removed from a group discussing terms of the
tie-up with Kroton. Earlier in the day, Valor Econômico reported
that the claim that Thompson worked against the deal originated
from an anonymous tip sent to Kroton.
The impasse is not the first involving executives and
shareholders of both companies since Kroton launched a hostile
takeover last May. Former Estácio CEO Rogério Melzi quit in
June, weeks after Kroton made an unsolicited takeover bid, after
opposing the 28-billion-real ($9 billion) asset combination.
"The company vehemently rebuffs each and any allegation that
management could be conspiring to thwart the planned business
combination with Kroton," the filing quoted Thompson as saying.
In a separate filing, Kroton confirmed receiving an
anonymous tip. Kroton, which promptly communicated Estácio's
Chairman João Cox the content of the anonymous tip, also denied
interfering in Estácio's management ahead of regulatory approval
of the takeover, a practice known as "gun jumping."
The situation triggered steep declines in shares of both
Kroton and Estácio, which shed 2.8 percent and 3.6 percent,
respectively, in early afternoon trading in São Paulo.
The news comes as Kroton tries to convince regulators and
consumer advocate groups that the deal would not be detrimental
to the industry or lead to excessive market concentration. The
combination would create the world's largest education company
by market value and number of students.
Last month, officials at antitrust watchdog Cade issued a
non-binding opinion saying Kroton's takeover of Estácio could
hamper competition in Brazil's education market.
The Valor report said Thompson suggested to an external
legal advisor in an email that Estácio could show regulators
that there was evidence of gun jumping. Demarest Advogados,
Estácio's legal advisor on the deal, declined to comment.
Thompson said Estácio would "never abdicate from its
commitment to investigate rigorously any denounce or allegation
involving the conduct" of staff. Kroton is awaiting conclusion
of that investigation.
Estácio agreed to the deal in July, after Kroton improved
terms of its original bid twice.
($1 = 3.1172 reais)
(Reporting by Guillermo Parra-Bernal, Gabriela Mello and Ana
Mano; Editing by Lisa Von Ahn and David Gregorio)