June 21, 2017 / 11:37 AM / a year ago

Brazil antitrust watchdog mulls veto of Kroton-Estácio merger -papers

BRASILIA, June 21 (Reuters) - Brazil’s antitrust watchdog Cade is considering vetoing next week the merger of the country’s two largest for-profit education firms, Kroton Educacional SA and Estácio Participações, newspapers Valor Econômico and O Estado de S. Paulo reported on Wednesday.

Cade will meet next Wednesday to give a final ruling but only one of the agency’s five directors, Cristiane Alkmin, has given signs that the deal could be approved, the newspapers said, citing unidentified sources close to the discussions.

In February, a preliminary report by the watchdog’s economic studies department said the deal could hamper competition and lead to higher costs for consumers.

Cade has already been demanding asset sales larger than initially expected, such as the possible divestment of college brand Anhanguera Educacional, before approving the merger, sources had told Reuters earlier in the month.

Shares of Estácio Participações fell 7.1 percent on Tuesday on fears the deal could be blocked. Kroton dropped 3.9 percent.

The $1.7 billion Kroton bid was approved by Estácio’s shareholders almost a year ago.

If Cade orders the companies to sell assets equivalent to more than 25 percent of total revenue, one clause in the merger agreement allows the parties to undo the deal without penalties, sources told Reuters.

Spokespersons for Estácio, Kroton and Cade did not immediately respond to emailed requests for comments. (Writing by Silvio Cascione; Editing by Bernadette Baum)

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