4 MIN. DE LECTURA
(Adds Ser Educacional's reaction, background)
By Tatiana Bautzer and Juliana Schincariol
SAO PAULO/ RIO DE JANEIRO, July 1 (Reuters) - Brazil's No. 2 for-profit college operator Estácio Participações SA said on Friday its board accepted financial terms of an improved takeover bid from larger rival Kroton Educacional SA worth 5.5 billion reais ($1.7 billion), nearly ending a month-long battle.
Kroton, the world's largest education company by market value, said in a filing it had offered a swap ratio of 1.281-to-1 for Estácio's shares as well as a one-off cash payment of 170 million reais ($52.84 million), equivalent to roughly 0.55 reais per Estacio share.
The stock swap ratio was only 2 percent higher than the previous Kroton proposal, equivalent to 1.25 shares of Estacio.
Estácio said its board had agreed at a meeting on Thursday to the financial conditions of Kroton's new offer, pending the negotiation of operational terms of the agreement between the two companies and the regulatory authorities' approval.
The board will meet again on July 8 to review the terms of the merger and, if all the conditions are agreed on, call for a shareholders' assembly to approve the proposal.
Kroton shares closed up 5.4 percent at 14.34 reais in Sao Paulo. Estácio shares gained 1.95 percent to close at 17.29 reais.
The deal could unleash a wave of mergers in Brazil's education sector, underscoring the resilience of for-profit college operators during a two-year recession in which student delinquencies have risen and the government has slashed funding for student loans.
Kroton's third bid for Estácio followed an improved offer on Wednesday from smaller rival Ser Educacional SA. Ser will use all legal means to ensure antitrust laws are met in Kroton's deal with Estácio, a source with knowledge of the matter told Reuters.
Analysts have said antitrust watchdog Cade will ask the new company to divest some businesses. The combined Kroton-Estácio will have more than 1.5 million students, a 23 percent market share in colleges and 50 percent market share in online or distance learning.
Ser is considering the best moment to officially drop its bid for Estácio, a source familiar with the situation said, adding that the company has already been approached by other for-profit education groups to discuss possible combinations.
Grupo BTG Pactual SA advised Estacios board and the investment banking unit of Itaú Unibanco Holding SA advised Kroton in the deal.
The boards blessing for the deal will make it easier for Kroton to integrate Estácio. Kroton had considered turning the bid hostile if the board did not endorse the proposal.
Estácio and Kroton have a number of large shareholders in common, such as New York-based OppenheimerFunds Inc, San Diego-based Brandes Investment Partners LP and Cape Town-based Coronation Fund Managers Ltd.
Kroton was counting on them in the case of an hostile bid, since those common shareholders hold more than 50 percent of Estácio. Coronation Fund Managers had already endorsed Kroton's earlier bid, its co-managers told Reuters.
Estácio's No 2 shareholder, the Zaher family, which holds 14 percent of the company, has opposed the deal with Kroton and demanded to receive 1.5 shares in Kroton for one Estacio share. The Zahers have mulled a competing offer, but did not formalize it. Patriarch Chaim Zaher is Estácios chief executive officer.
$1 = 3.2054 Brazilian reais Reporting by Tatiana Bautzer and Juliana Schincariol, additional reporting by Silvio Cascione; Editing by Daniel Flynn and Tom Brown