Legal Magazine

Brazil M&A Update: Kroton, Restoque, and Renova in Deals

Posted on the 28 June 2016 by Angelicolaw @AngelicoLaw

Brazil’s economy may be on shaky ground, but that has not deterred some of the nation’s largest corporations from pursuing deals intended to make them financially stronger. Our Brazil M&A update looks at corporate transactions in the education, fashion, and energy sectors.

Kroton bids for Estácio

Kroton Educacional, the largest education company in Brazil, has publicly revealed its plan to acquire rival Estácio. The proposed $968 million bid (3.48 million reais) is a stock deal, which apparently came as a surprise to Estácio. According to Bloomberg, Estácio told Brazilian regulators that it learned of the larger company’s interest in an acquisition from its regulatory filing.

In its announcement of the bid, Kroton acknowledged that it had not formally contacted Estácio, but said that it intends to reach out to Estácio’s management to start talks on a deal. Estácio has 600,000 students compared with the 1 million students of Kroton, according to Bloomberg.

Restoque and Inbrands enter merger talks

Merger discussions are apparently further along between fashion retailer Restoque Comércio e Confecções de Roupas and rival company Inbrands. Restoque said in a regulatory filing that the two companies have signed a memorandum of understanding to consider a possible merger, Reuters reported. The combined company would have $781 million in revenue (2.8 billion reais) generated by 730 stores. The companies said that they will also present the deal to Brazilian antitrust regulators. If the deal passes regulatory muster, the merged companies plan to raise additional cash through a public stock offering.

Renova pursues capital infusion

Renewable energy company Renova Energia is looking to address its capital needs by adding a new partner to its block of controlling shareholders, according to Reuters. Three unnamed sources said that this new partner would add approximately $279 million (1 billion reais). Right now, majority control of Renova is in the hands of Companhia Energética de Minas Gerais (CEMIG) and its subsidiary, Light Energia. Reuters’ sources said that along with the capital infusion, the deal would include Light Energia’s plan to exit its position in Renova.

Renova has been pursuing opportunities to raise cash, having failed at selling off assets last year. If the deal with the unnamed partner takes place, Renova plans to use the new capital to cut its 570 million reais debt, and use 500 million reais for expansion, according to one of Reuters’ sources. Details about the deal should be coming soon.

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