THURSDAY, MAY 15, 2014

SAO PAULO–Brazil’s antitrust regulator approved the merger of Brazilian educational companies Kroton Educacional SA (KROT3.BR) and Anhanguera Educacional Participacoes SA (AEDU3.BR), but obligated the companies to sell certain assets.

The merger deal was announced last year and would create the country’s largest educational company in terms of revenues. In the first quarter, the companies combined posted net revenue of 1.21 billion Brazilian reais ($552 million), with a total of more than one million students across the nation. Anhanguera’s shares would be incorporated by Kroton.

Brazil’s Administrative Council for Economic Defense, or CADE, obligated Kroton to sell its distance learning operation called Uniasselvi. Also, the regulator obligated the companies to sell certain assets in Mato Grosso state. Uniasselvi was acquired by Kroton in 2012 for BRL510 million and it is considered a crown jewel by analysts.

CADE said that the deadline for the divestment is confidential.

“While it could take some time for the divestment to materialize, anything below Uniasselvi’s potential fair value would require more to come from Anhanguera’s improved operations–totally feasible, but definitely not risk-free. All eyes are now on the execution,” Credit Suisse said in a research report for its clients. The investment house estimates Uniasselvi’s assets at between BRL800 million and BRL900 million.