July 31, 2017 / 11:56 AM / a year ago

UPDATE 1-Brazil's Estácio to revamp bylaws after failed takeover

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SAO PAULO, July 31 (Reuters) - Estácio Participações SA , Brazil’s No. 2 for-profit education firm, has proposed a broad overhaul of corporate governance rules following a failed takeover attempt by larger rival Kroton Educacional SA.

In a securities filing on Monday, Estácio proposed creating a strategic committee and a framework to help deal with unsolicited stake increases exceeding 20 percent of outstanding stock. The proposal will be voted on during an extraordinary shareholder meeting scheduled for Aug. 31.

As a company with dispersed share ownership, Estácio needs “a continuous fine-tuning of good corporate practices to succeed in having a more transparent management and protect shareholders more effectively,” Chief Executive Officer Pedro Thomson was quoted as saying in the filing.

The move comes about a month after antitrust watchdog Cade rejected Kroton’s proposed takeover of Estácio, citing excess market power stemming from a tie-up that would have formed the world’s No. 1 education firm.

Uncertainty about the deal mounted as rivals and consumer groups aired concerns about the creation of a juggernaut that would have 10 times as many students as the No. 2 ranked peer.

It also led Thompson to implement a broad turnaround at Estácio, including boosting student loyalty as opposed to boosting enrollment, over the past year.

For months, executives at the companies traded barbs over the tie-up, with Kroton’s management accusing Thompson of seeking to derail the deal.

Shares of Rio de Janeiro-based Estácio surged 15 percent on Friday, the most in 13 months, on speculation that U.S.-based private equity firm Advent International Corp and shareholder Chaim Zaher were considering boosting their stakes.

The Valor Econômico newspaper said Advent aims to build a 15 percent-to-18 percent stake in Estácio, from about 5 percent currently. Zaher and his family could increase their stake to about 19 percent from 10.5 percent currently, Valor said, without detailing how it obtained the information.

Neither bidder intends to acquire over 20 percent of the Estácio shares to avoid triggering a mechanism that would force them to bid for the entire company, Valor said.

Estácio, Advent and Zaher did not immediately respond to requests for comment. (Reporting by Guillermo Parra-Bernal, Ana Mano and Gabriela Mello; Editing by Bernadette Baum)

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