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SAO PAULO (Reuters) - Brazilian for-profit education company Estácio Participações SA (ESTC3.SA) denied a report on Friday that top managers were attempting to boycott a sale to larger rival Kroton Educacional SA (KROT3.SA), the latest hurdle to a deal that would create the sector's global leader.
In a securities filing, Estácio said Chief Executive Officer Pedro Thompson was removed from a group discussing terms of the tie-up with Kroton. Earlier in the day, Valor Econômico reported that the claim that Thompson worked against the deal originated from an anonymous tip sent to Kroton.
The impasse is not the first involving executives and shareholders of both companies since Kroton launched a hostile takeover last May. Former Estácio CEO Rogério Melzi quit in June, weeks after Kroton made an unsolicited takeover bid, after opposing the 28-billion-real ($9 billion) asset combination.
"The company vehemently rebuffs each and any allegation that management could be conspiring to thwart the planned business combination with Kroton," the filing quoted Thompson as saying.
In a separate filing, Kroton confirmed receiving an anonymous tip. Kroton, which promptly communicated Estácio's Chairman João Cox the content of the anonymous tip, also denied interfering in Estácio's management ahead of regulatory approval of the takeover, a practice known as "gun jumping."
The situation triggered steep declines in shares of both Kroton and Estácio, which shed 2.8 percent and 3.6 percent, respectively, in early afternoon trading in São Paulo.
The news 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.
Last month, officials at antitrust watchdog Cade issued a non-binding opinion saying Kroton's takeover of Estácio could hamper competition in Brazil's education market.
The Valor report said Thompson suggested to an external legal advisor in an email that Estácio could show regulators that there was evidence of gun jumping. Demarest Advogados, Estácio's legal advisor on the deal, declined to comment.
Thompson said Estácio would "never abdicate from its commitment to investigate rigorously any denounce or allegation involving the conduct" of staff. Kroton is awaiting conclusion of that investigation.
Estácio agreed to the deal in July, after Kroton improved terms of its original bid twice.
Reporting by Guillermo Parra-Bernal, Gabriela Mello and Ana Mano; Editing by Lisa Von Ahn and David Gregorio