Dragoneer Investment Group and General Atlantic invested USD100m and USD50m, respectively, in Brazil-based edtech Arco, through the purchase of convertible senior notes.

(Arco) (Nasdaq: ARCE), today announced that it has entered into agreements led by affiliates of Dragoneer Investment Group LLC (“Dragoneer”), which have committed to make a US$100 million strategic investment, and General Atlantic Partners (Bermuda) J, L.P. (“General Atlantic”), which has committed to make a US$50 million strategic investment, through the purchase of convertible senior notes, subject to customary closing conditions.

Each note will be convertible at the option of the holder into Arco’s Class A common shares at the agreed conversion rate, which is equivalent to an initial conversion price of US$29 per share. The conversion price represents an approximately 65% premium to the trailing 30-day volume-weighted share price. Dragoneer and General Atlantic will beneficially own approximately 5.6% and 2.8%, respectively, of the total shares of the Company (on an asconverted basis for the convertible senior notes).

The convertible notes mature in 7 years, on November 15, 2028, and bear interest at 8% per year fixed in Brazilian reais, payable quarterly in cash in arrears in United States dollars, therefore mitigating currency risk.
“We are excited to have Dragoneer and General Atlantic as investors and valuable future partners to our company,” said Ari de Sá Neto, CEO and founder of Arco. “We see clear value creation arising from these partnerships, as we will benefit from their global investment experience in high-growth companies, while taking advantage of a better funding profile to support our growth strategy.”

Dragoneer is a leading growth-oriented investment firm with a history of partnering with management teams growing exceptional companies characterized by sustainable differentiation and superior economic models. The firm invests in private and public companies across industries and geographies, with a particular focus on technology-enabled businesses.

“In building Arco’s technology platform, Ari has made a best-in-class pedagogical approach accessible to over 1.8M students across Brazil. Arco’s brands are loved by teachers, students and parents alike, and drive real improvements in educational outcomes,” said Eric Jones, Partner at Dragoneer Investment Group. “At the business level, Arco has strong revenue growth and visibility, expanding customer cohorts, minimal churn, and near-to-40% EBITDA margins. We are thrilled to support the Arco team as they continue to scale quickly and
expand their platform in education.”

General Atlantic is a leading global growth equity firm with more than four decades of experience investing in and building disruptive growth companies. The firm seeks to partner with visionary entrepreneurs around the world to drive technological innovation and deliver lasting impact.

Martín Escobari, Independent Director at Arco and Co-President, Managing Director and Head of Latin America at General Atlantic, said “Arco has redefined education in Brazil, leveraging the power of digital enablement to expand access to critical learning experiences to millions of students across the country. We have been long-term supporters of Arco’s mission and look forward to again partnering with Ari and the leadership team to drive transformative change in Brazil’s education ecosystem.”

We believe this announcement reinforces Arco’s strategic growth plan for the coming years. In October, Arco finalized the acquisition of COC and Dom Bosco from Pearson, brands which serve over 800 partner schools and 210 thousand students. COC and Dom Bosco complement Arco’s existing portfolio in geography and price-point and expand their market leading position in K-12 core learning systems. Arco intends to use the proceeds from Dragoneer’s and General Atlantic’s investments to fund its growth strategy, including an emphasis on cross-selling portfolio brands and making accretive acquisitions in existing and new verticals.

J.P. Morgan acted as Capital Markets Advisor to Arco on the transaction.