R$ 5 Billion Brazilian Merger Creates Global Education Giant

In a billion-dollar transaction, the world’s biggest education group, Kroton, of Brazil, advanced even further as it merged with Anhanguera. The companies will engage in a R$ 5-billion stock exchange (US$ 2.5 billion).

The new giant will have a market value of some US$ 5.8 billion (R$ 13 billion) – twice the size of the sector’s number 2, China’s New Oriental (US$ 2.9 billion).

The stock market received the news well: both companies’ stocks rose yesterday. Those of Kroton rose 8.38% and Anhanguera’s 7.76%.

The companies will submit the operation to Cade (Administrative Council of Economic Defense) in ten days. Cade said, however, that the case will only be analyzed after the decision on four pending cases (3 of Anhanguera and 1 of Kroton).

There is a chance that Cade will analyze all the cases together. However, there is little overlap in Kroton’s and Anhanguera’s operations, says Rodrigo Galindo, Kroton’s chief executive and the future executive president of the company resulting from the merger.

Only four of 80 cities in which the companies are active have units of both groups. Galindo says there is a 10% overlap in the area of long distance education.

According to the 2011 education census, the two companies’ market share is 14% — one million students in schools and colleges.

The group’s brands (such as Unopar, Anhanguera Pitágoras and Unic) will be maintained. Aside from their size, Kroton and Anhanguera have similar backgrounds.

Supported by financial groups, they led an aggressive expansion in recent years, seeking students mainly in the C and D classes. With the merger, the goal is to expand this strategy.

( Marianna Aragão & Renata Agostini | Folha de S. Paulo)