| SAO PAULO
SAO PAULO Nov 23 Kroton Educacional SA
is considering disposing of Estácio Participações
SA's entire distance-learning business to secure Brazilian
antitrust approval for the country's largest education industry
takeover, according to two people familiar with the plan.
Estácio's distance-learning business, comprised of Uniseb
and other brands, seems the best asset-sale option that does not
compromise the goals of the Kroton-Estácio deal, the people
said. Any eventual proposal will still have to be discussed in
detail with antitrust watchdog Cade, they said.
Selling the brands would deprive the combined company,
thought to be the world's largest education firm by market
value, of about 7 percent of Estácio's distance-learning revenue
and approximately 100,000 students. Kroton and Estácio may also
commit not to enroll new online students for a period if asset
disposals alone do not suffice, the people noted.
Belo Horizonte-based Kroton and Rio de Janeiro-based Estácio
declined to comment, as did Cade, which is based in Brasilia.
Both companies are seeking to show Cade that they are
working effectively toward avoiding the excess market power they
could win with their combination, said the people, who asked for
anonymity to speak freely about the plan.
Kroton's efforts comes as rivals, consumer advocate groups
and regulators alike step up scrutiny of a combination that
could create a giant with 10 times more enrolled students than
its closest rival. In terms of online students, Kroton-Estácio
could be up to 28 times bigger than the local unit of U.S. peer
Laureate Education Inc.
Kroton filed takeover approval documentation with Cade on
Aug. 31. The watchdog has until about May to decide on the
Shares of Kroton are up 63 percent this year, while those of
Estácio are up 33 percent, reflecting investor
confidence that the deal will win approval despite potential
The sale of Estácio's online assets will also require
approval from the Education Ministry because it entails a
separation from Estácio's on-site business, the people said.
Aside from competition concerns arising in the
distance-learning segments, both Kroton and Estácio acknowledged
excessive market concentration in 17 cities where they operate
on-site colleges, the people said.
Although Kroton and Estácio have not yet voluntarily
proposed remedies to address issues in this specific segment,
Cade may impose on-site segment disposals, the people noted,
adding that such a scenario will force them to negotiate with
Cade on a per-case basis.
(Editing by Guillermo Parra-Bernal)