Advent International takes 50 per cent stake in Brazilian holding company

Advent has injected BRL$280m ($142.7m), BRL$220m ($112m) of which will be used to fund a capital increase in Kroton through a private subscription of additional shares in a total amount of up to BRL$388m ($198m).

Advent now has 50 per cent ownership of PAP and around 28 per cent of Kroton.

Founded in 1966, Kroton offers primary, secondary and post-secondary education programmes throughout Brazil.

Since July 2007, when Kroton raised BRL$455.8m ($232m) with its initial public offering on Bovespa, the company has embarked on an expansion plan, which has included the acquisition of 12 colleges and the opening of new campuses. Today, Kroton has net revenues of BRL$279.6m and EBITDA of BRL$51.5m in 2008. In the first quarter of 2009, the company posted net revenues of BRL$107.5m and an EBITDA of BRL$35.7m, rising 51.4 per cent and 37.6 per cent respectively over the previous year’s figures.

Kroton is Advent’s fifteenth investment in Brazil since 1997, when it started its activities in the country.  Funding for this deal will come from Latin American Private Equity Fund IV, which was raised in 2007 and capitalised at $1.3bn. Since the raising of LAPEF IV, Advent has already invested in four companies in Brazil: Viena, a casual dining restaurant chain; Frango Assado, a highway restaurant chain; Quero-Quero, a home-improvement retailer in southern Brazil; and CETIP, the largest central depository for private fixed-income securities and over-the-counter derivatives in Latin America.

“Kroton combines high-quality education services, a proven track record of organic and acquisition-led growth and a highly-skilled management. We believe the company provides a strong platform from which to consolidate the education sector in Brazil and we look forward to working with the management team to accelerate the expansion of the business,” said Juan Pablo Zucchini, a managing director in Advent International’s São Paulo office. Zucchini led the investment in Kroton.

“It’s a very fragmented market, with many opportunities ahead,” Zucchini added. “The Brazilian education sector has been growing at a compound annual rate of ten per cent over the past decade and is still characterised by a low number of students with post-secondary degrees, even relative to other countries in Latin America.”
Since 1984, Advent has invested in over 500 companies in 35 countries. Over 140 of these companies have achieved IPOs on major stock exchanges around the world.

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