SAO PAULO, Nov 23 (Reuters) - 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 transaction.
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 regulatory roadblocks.
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)