Advent Invests in Education

Private equity firm Advent International has made a BRL280m investment to acquire a 50% stake in Brazil’s Pitagoras Administracao e Participacao and about 28% of Pitagoras subsidiary Kroton Educacional, which is one of the largest private education companies in the country. Advent says that of the BRL280m, BRL220m will be used to fund a capital increase in Kroton through a private subscription of additional shares for up to BRL387.9m. Funding for the deal will come from Advent’s Latin American PE Fund IV, which was raised in 2007and capitalized at $1.3bn. Itau’s investment bankers worked on the transaction, but its research department is not impressed. “We see this deal as negative and expect the market to react negatively since the controller valued the company at no premium to current market price and below our BRL19.2 per unit fair value,” Itau says. It adds that the deal implies a price of BRL16.2 per share. The shop maintains an underperform rating on Kroton. On June 25, Kroton shares closed at BRL14.79, down almost 8%. A banker close to the transaction blames dilution for the slide, but notes an opportunity to buy. “It is definitely a major step in the continued expansion and consolidation of the education sector,” adds the source.