Kroton creates new holding to administer 4 business units

Kroton is creating a holding company to oversee four companies focused on higher education and elementary and secondary education as part of a comprehensive organizational remodeling. The holding company, Cogna Educação, will be led by executive President Rodrigo Galindo, who told investors and analysts during an event in São Paulo that the group "has plenty of room to grow" in the face of the current participation of 3.9% in the country's educational market, Valued at R $174 billion. Kroton's shares will be traded under a new code-COGN3-from October 11th. Next year, the holding will also launch a venture capital fund with a focus on education, Cogna Ventures, consisting solely of its own resources. "This venture capital fund will invest in minority holdings, partnerships, always seeking disruptive solutions that can help one of the four companies in the group," Galindo said. There is still no definition about the size of the fund or the potential targets, according to it. The company's higher education activities, which include more than 800,000 students in 176 units and 1,410 distance learning poles, will continue to operate under the Kroton brand. "Our market share in this segment is only 9.1% and we see potential to grow even more organically or through acquisitions," said the CEO, adding that Kroton's cash generation is beginning to improve and that the division probably will remain the largest in the holding in the next five years or more. Saber, another unit of Cogna Educação, offers elementary and secondary education, a segment in which the group has a participation of 1.2%, with plans to resume acquisitions and new projects once the new organizational structure is operating efficiently. "We would like to resume (acquisitions and greenfields) next year, but we do not set a deadline and the trigger will be a well-oiled platform," Galindo said. A third division, Platos, will serve corporate clients in higher education, while the fourth, vast education, helps private primary and secondary schools manage their operations, with didactic materials and teaching systems. For Galindo, Platos and vast education have the potential to expand operations to other markets in Latin America, including Peru, Colombia and Mexico, although the focus should continue in Brazil in the medium term. Under the new structure of the holding company Cogna, added, all four units will have more autonomy to administer business and its results will be published separately from the first quarter of 2020. "Different strategies can be adopted and we are open to all possibilities that can generate value," Galindo said when asked if some of the units could consider an initial offer of shares (IPO) abroad or the entry of funds from Private equity in its shareownership composition. As part of the organizational restructuring, the shareholders of Cogna Educação will vote on November 18 to nominating three new members of the board of directors, including Galindo. Kroton's action accumulates a 23% appreciation so far in 2019.