(Recasts to explain meaning of decision, include share performance, background throughout)
SAO PAULO May 7 Kroton Educacional SA and Anhanguera Educacional Participações SA , which last year agreed to merge to form the world's largest for-profit education company, agreed on Wednesday to change the terms of their deal to overcome some market and regulatory hurdles.
In a joint securities filing, Kroton agreed to offer 0.30970293 of its own stock for one share of Anhanguera, down from a 0.4548-to-1 ratio when the merger was announced in April last year.
Although both companies said on Feb. 28 that terms would not change, a surge in shares of Anhanguera since the merger was disclosed were making the deal expensive for Kroton.
Shares of Belo Horizonte, Brazil-based Kroton rose 3.4 percent, while those for Valinhos, Brazil-based Anhanguera soared almost 7 percent. Kroton shares have gained more than 80 percent since last May, compared with 19 percent for Anhanguera - making the former swap ratio too onerous for the former.
Management for the companies will discuss the decision with investors on a conference call later on Wednesday.
Should the companies combine, they would form a corporation which would be the No. 1 for-profit company by market value in the world, according to Thomson Reuters data.
Kroton offered to buy Anhanguera in April last year in an all-stock deal, creating a company with over 1 million students and with a market capitalization close to $6 billion. The transaction is also facing some opposition from Brazil's antitrust watchdog, known as Cade, whose councilors voiced concern that the combination could hamper competition in the market.
The deal represented a peak in a wave of consolidation in Brazil's burgeoning education market. A growing portion of the country's middle class enroll in private universities to qualify them for better jobs, luring attention and heavy investment from foreign companies including Pearson Plc and Laureate Education Inc.
Kroton also agreed to distribute up to 100 percent of net income as dividend payouts through the first quarter of this year, setting a cap of 483 million reais ($217 million), the filing added. ($1 = 2.23 Brazilian reais) (Reporting by Guillermo Parra-Bernal and Cesar Bianconi; Editing by Jeffrey Benkoe and W Simon)