January 30, 2017 / 3:51 PM / a year ago

UPDATE 1-Brazil's SEB considers IPO after buying back Pueri unit from Pearson

(Adds comments from SEB CEO, background throughout)

By Tatiana Bautzer

SAO PAULO, Jan 30 (Reuters) - Grupo SEB do Brasil could seek an initial public offering following the repurchase of a learning system division from Pearson Plc, to fund growth of the profitable business unit across privately owned elite schools, Chief Executive Officer Chaim Zaher said on Monday.

Earlier in the day, SEB do Brasil announced that it bought back the Pueri Domus learning systems division from the U.K.-based publishing and education giant for an undisclosed value, seven years after Zaher sold Pueri Domus and another three similar units for about $500 million.

Zaher, who started in business as a peddler to became one of Brazil’s most prominent education investors, told Reuters that reaquiring Pueri Domus should help strengthen SEB’s strategy of winning market share across elite schools - which tend to charge higher tuition fees than other schools.

His move comes about six months after he agreed to sell his stake in college operator Estácio Participações SA to larger rival Kroton Educacional SA. At the time, he hinted that he would seek to grow in other segments of Brazil’s education sector, which has undergone rapid growth amid record state subsidies to students.

An IPO would help Grupo SEB accelerate a plan to step up acquisitions of private schools outside Brazil, Zaher added, declining to say which countries or the kind of targets it would pursue. The first of those acquisitions could take place as early as February, he added, without elaborating.

The IPO of Grupo SEB could take place as early as next year, he said. With 45,000 students enrolled, Grupo SEB’s annual revenue totaled around 500 million reais ($160 million) last year, Zaher said.

“We are already growing overseas and we want to consolidate our overseas operations,” Zaher said in a phone interview. “Basic education could lead the next wave of investment in the sector, and I think there’s demand among investors for such type of plays.”


Grupo SEB owns 40 private schools, some of them bilingual, that cater to upper-middle class Brazilian students. The company already has a primary, secondary and high school operation in Palo Alto, California.

Zaher’s move underscores how investors in Brazil’s education industry are trying to look for business segments in which market concentration remains very fragmented and fees tend to raise in line with income brackets.

The Kroton-Estácio deal, which will create the world’s No. 1 education firm by market value, has drawn tough scrutiny from antitrust watchdog Cade, rivals and consumer advocacy group claiming the new entity will have too much market power across the college segment.

The other three learning systems that Zaher and his partners sold to Pearson seven years ago will remain in the control of the latter. Zaher said Grupo SEB has renewed franchisee contracts with Pearson over the use of the three units’ products.

$1 = 3.1190 reais Editing by Guillermo Parra-Bernal and Andrea Ricci

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