SAO PAULO, March 17 (Reuters) - The board of Brazilian for-profit education company Estácio Participações SA has removed Chief Executive Officer Pedro Thompson from a group discussing merger terms with rival Kroton Educacional SA on allegations that he is boycotting the deal, Valor Econômico reported on Friday.
According to Valor, which cited unnamed people familiar with the matter, the board opened a formal probe into an anonymous tip suggesting that Thompson is working against Kroton’s takeover of Estácio. Former Estácio CEO Rogério Melzi quit last year for opposing the 28-billion-real ($9 billion) deal.
The source of the anonymous tip sent Estácio’s board an exchange of emails in which Thompson suggested a lawyer accuse Kroton of interfering in Estácio’s affairs before antitrust approval, Valor said. Last month, officials at antitrust watchdog Cade said Kroton’s takeover of Estácio could hamper competition in Brazil’s education market.
Media representatives of Kroton, Estácio and Demarest Advogados, Estácio’s legal advisor on the deal, did not immediately respond to calls and messages seeking comment.
The report comes as Kroton tries to convince regulators and consumer advocate groups that the deal would not be detrimental to the industry or lead to excessive market concentration. The combination would create the world’s largest education company by market value and number of students.
Thompson’s strategy of focusing on student loyalty has paid off, helping Estácio report higher-than-expected fourth-quarter earnings on Thursday. Under Thompson, Estácio’s selling, general and administrative expenses have slumped; student enrollment has climbed; and higher tuition fees have pushed revenue above analysts’ estimates.
$1 = 3.1172 reais Reporting by Guillermo Parra-Bernal and Gabriela Mello; Editing by Lisa Von Ahn