Brazil's Kroton creates holding co in broad reshuffle of business -CEO

By Gabriela Mello and Peter Frontini

SAO PAULO, Oct 7 (Reuters) - Brazilian education provider Kroton SA is creating a new holding entity that will oversee four different companies focused on higher education as well as primary and secondary schooling, as part of a broad organizational reshuffle.

The holding company, Cogna Educação, will be led by Chief Executive Rodrigo Galindo, who told investors and analysts during an event in Sao Paulo that the group has “a lot of room to grow” from its current 3.9% share of Brazil’s education market, valued at 174 billion reais ($42.56 billion).

Kroton’s stock will have a new ticker symbol - ‘COGN3’ - as of Oct. 11. Next year, the holding company will also launch an education-focused venture capital fund, Cogna Ventures, funded by the company.

“This venture capital fund will invest in minority stakes, partnerships, always seeking disruptive solutions that might help one of the four companies under the holding,” Galindo said. He did not disclose the size of the fund or potential targets.

The company’s higher education activities, which include over 800,000 students in 176 schools and 1,410 distance learning centers, will continue operating under the Kroton brand.

“Our market share in this segment is only 9.1% and we see potential to further grow organically or through acquisitions,” the CEO said, adding that Kroton’s cash generation is starting to improve and the division is likely to remain the largest business of the holding company in the next five years or so.

Saber, another Cogna unit, provides primary and secondary schooling, a market in which the group has a share of only 1.2%, with plans for acquisitions and new greenfield projects once the new organizational structure starts operating efficiently.

A third division, Platos, will serve corporate clients (B2B) in higher education, while a fourth, Vasta Educação, will help existing primary and secondary schools manage their operations and provide learning systems.

For Galindo, both Platos and Vasta Educação have the potential to expand operations to other Latin American markets in the future, including Peru, Colombia and Mexico.

Under the new holding structure, all four units will have more autonomy to run their businesses and their results will be published separately as of the first quarter of 2020, he said.

Galindo said he is “open to all possibilities to generate value” when asked about potential listings of units or sales of stakes to private equity funds.

Kroton shares ended 2.7% lower on Monday at 10.80 reais, reducing gains so far this year to 23%.