SAO PAULO Feb 3 A Brazilian merger creating the
world's largest for-profit education company could hamper
competition and lead to higher costs for consumers, antitrust
agency Cade said on Friday.
The agency's preliminary finding was contained in a report
by its economic studies department, which gauged the impact of
the proposed takeover of Estácio Participacoes SA by
rival Kroton Educacional SA to form an education
powerhouse with some 1.5 million students.
"The deal would remove an important player with a
consolidated brand and capacity to invest in advertising and
marketing, which has contributed to increased competition among
the companies, by adopting a strategy of lower prices," Cade's
Their preliminary finding will be followed by a more
comprehensive analysis by Cade and a final ruling by the
agency's board by late July.
Scrutiny of the Kroton-Estácio tie-up comes as rivals and
consumer groups air concerns about creating a juggernaut with 10
times as many students as its closest rival in Brazil.
Kroton shares fell as much as 5 percent in Friday trading
before paring losses to 2 percent at 13.43 reais in the
"The report is critical of the merger," wrote J.P.Morgan
analysts Marcelo Santos and Andre Baggio. "We continue to expect
the deal to be approved, although there is a risk of additional
Estácio declined to comment on the study. Kroton's press
representatives were not immediately available for comment.
Reuters reported in November that Kroton was mulling the
sale of Estácio's distance-learning business to secure
regulatory approval for the takeover.
(Reporting by Ana Mano; Editing by Tom Brown)