| SAO PAULO
SAO PAULO Dec 20 Three education groups have
formally opposed Estácio Participacoes SA's plan to
spin off distance-learning operations to win approval for a
takeover by Kroton Educacional SA in Brazil's largest
education industry merger.
Fenep, an entity representing about 5 million private-sector
students from kindergarteners to post-graduates, joined with
groups Abrafi and Anaceu to lodge a complaint with the Education
Ministry over the proposed spinoff, Amábile Pacios, a Fenep
director, told Reuters on Tuesday.
The challenge to the Kroton-Estácio tie-up comes as rivals,
consumer groups and regulators step up scrutiny of a deal that
could create an education company with 10 times more enrolled
students than its closest rival in Brazil.
In March, Kroton and Estácio consulted Seres, a regulatory
oversight body of the ministry, regarding the possibility of
getting approval for a spinoff of an unnamed unit, according to
documents reviewed by Reuters.
The ministry said such a request would only be granted under
exceptional circumstances including a legal ruling or the
migration of state schools to the federal system, according to a
joint statement by Anaceu and Abrafi.
"Aside from breaching the existing norms, the proposed
separation will create two big monopolies, on the on-site and
the online segments," Pacios said.
Kroton is mulling disposal of 100 percent of Estácio's
distance-learning business to secure Brazilian antitrust
approval for the takeover.
Without any disposals, Kroton-Estácio could be up to 28
times bigger than the local unit of U.S. peer Laureate Education
Inc in terms of online students.
Belo Horizonte-based Kroton and Rio de Janeiro-based Estácio
declined to comment specifically on the complaint by the
education groups. The Education Ministry did not immediately
respond to a request for comment.
Kroton said it remains committed to approving the deal
before competition watchdog Cade, and is prepared to introduce
remedies deemed necessary to address any monopolistic concerns.
The parties filed for Cade approval on Aug. 31. The agency
may take up to 330 days to complete analysis of a takeover or
Estácio wants to spin off its distance-learning division
away from its Niterói campus in a bid to create "an isolated
unit" which would then incorporate its online education
programs, according to the request sent to the ministry.
If granted, the request would pave the way for Cade to
approve the deal in a manner which the companies say would
"avoid market concentration" and "maintain student options,"
according to the document submitted to the ministry.
(Reporting by Ana Mano; Editing by Andrew Hay)