(DownJones)The rapidly growing educational services market in Brazil is attracting the interest of large international investors, who could snap up a controlling stake in the education unit of Brazilian conglomerate Grupo Positivo in the next few months.
U.S.-based investment firms including KKR & Co. L.P. ( KKR ), TPG Inc. and Carlyle Group L.P. ( CG ) as well as Brazilian investment fund manager GP Investments Ltd. (GPIV.11) are among the potential buyers for the unit, called Sociedade Educacional Positivo Ltda, according to two people familiar with the negotiations.
U.K. education services company Pearson Ltd. (PSO, PSON.LN) also is among the possible candidates, according to one of those people.
The deal, which is still not imminent, could value the Positivo education unit at around $700 million, according to one of those people. The second one estimated the value could be even higher.
Positivo, Pearson and the private equity firms declined comment for this article.
The Brazilian market for private educational services has grown rapidly over the past decade because of economic expansion and upward social mobility. Earlier this year, Kroton Educacional SA (KROT3.BR) and Anhanguera Educacional SA (AEDU3.BR) agreed to merge, creating the nation’s largest private education company.
“The education sector in Brazil has been growing faster than gross domestic product,” said Beatriz Nantes, a stock analyst at Sao Paulo-based Empiricus Research. “And even as the economy slows it shows resilience because education is not a luxury item.”
Brazil’s economy has slowed since 2011 and it’s expected to expand less than 2.5% in 2013. However, there’s still a lot of room for growth in the education sector in Brazil. According to data provided by Kroton last April, only 14.3% of Brazilians aged 18 to 24 are studying at the university level. Brazil’s government aims at bringing that figure up to 33% by 2020.
Last April, in an interview with Brazilian newspaper Valor Economico, Positivo’s Chief Executive Officer Helio Rotenberg said the group was studying whether to take the education unit public, but nor did he rule out a sale.
The Positivo group, founded in southern Brazil in the 1970s by a group of Brazilian teachers, has hired Swiss investment bank Credit Suisse (CS, CSGN.VX) to explore options, according to one of the two people. Credit Suisse declined to comment.
The Positivo group includes Positivo Informatica SA (POSI3.BR), the largest computer manufacturer in Brazil and a leader in the educational technology segment in Brazil. Positivo Informatica wouldn’t be included in any sale, both people said.
According to Positivo’s website, its educational arm has approximately 25,500 students. The firm has developed websites for private schools and public schools in Brazil, which are used by a further 10,800 schools. Contracts with Brazil’s government that could make the sale process more complex, although they’re unlikely to ultimately hold up a deal, according to one of the people familiar with the talks.
The second person said a deal would likely take a few months to be completed.