Shares of Ânima Educação are plummeting in trading on Wednesday, July 15th, with a drop of over 30%. Investors are reacting to the news that the company has completed the acquisition of Faculdades Metropolitanas Unidas (FMU).
After the market closed on Monday the 14th, the company informed the market of the purchase of FMU for R$ 410 million, with R$ 240 million paid upfront and R$ 170 million due by December 2029.
Around 1 p.m., ANIM3 shares were down 30.6%, trading at R$ 1.99. Year-to-date, the stock has depreciated by 39.5%, reducing the company's market value to R$ 808.1 million.
Two questions are currently causing the market to scratch its head, punishing the stocks: why and for what purpose did the company decide to proceed with the acquisition of a problematic asset at a price considered high?
The transaction involves an educational institution that is undergoing judicial reorganization. FMU was part of Laureate's portfolio , acquired by Ânima in 2020, but ended up being sold to the private equity firm Farallon .
According to Ânima, the arrival of FMU should strengthen the company's position in courses such as Law and in the health field, in addition to expanding the offer of courses in the Distance Learning (EAD) modality, whose rules were tightened by the federal government last year.
The justification did not convince analysts at BTG Pactual , who downgraded their recommendation for Ânima's shares from buy to neutral and reduced the target price from R$7 to R$4.
According to them, the acquisition is difficult to justify given the price paid and the market circumstances, with the cost of capital in Brazil at historically high levels. Analysts also state that Ânima continues to face a pressured balance sheet, despite efforts to reduce leverage and optimize its portfolio.
“We believe that the acquisition drastically changes the investment thesis that had been built on the consistent generation of free cash flow, greater dividend distribution capacity, and a better capital allocation strategy since the acquisition of Laureate,” says an excerpt from the report signed by analysts Samuel Alves, Maria Resende, and Marcel Zambello.
The price paid was also questioned by Citi . According to analyst Leandro Bastos, although the company presented "convincing arguments" about synergy opportunities and the strategic value of the brand, the financial terms are not convincing.
He states that the price paid assumes a valuation equivalent to 10.6 times the ratio between the firm's value (EV) and the EBITDA of the last 12 months, or 6.7 times after capturing synergies. This is a considerable premium compared to the multiple at which Ânima's shares are traded, which is 3.3 times.
“We believe the valuation premium is difficult to justify (a simple multiple arbitrage exercise suggests a drop of approximately 36%), while the increase in leverage is undesirable in a high interest rate environment,” says an excerpt from the report, which calculates that the ratio between net debt and EBITDA will rise from 2.4 times to 2.7 times.
The price is also not justified by the current situation at FMU, which is facing operational difficulties. BTG Pactual states that the institution has lost market share in São Paulo, where it operates — from 9% in 2021 to 6% in 2024 — in addition to facing significant financial challenges, which led it to file for bankruptcy protection last year.
The Citi analyst states that "integrating a poorly performing asset into a bankruptcy reorganization process should be a challenge."
Itaú BBA gave less weight to the valuation. Although they acknowledge that FMU's valuation and the impacts on leverage are significant factors, analysts Vinicius Figueiredo, Lucca Marquezini, and Felipe Amancio state that the asset may offer opportunities for operational and commercial integration into Ânima's ecosystem over time.
They highlight a company calculation according to which, if FMU's operating margins converge to the current levels of large comparable institutions within Ânima, the asset's operating profit could increase from R$ 53 million to somewhere between R$ 97 million and R$ 131 million, before considering any revenue growth.
"We recognize that the strategic value of the transaction is not always easy to quantify; however, valuation and leverage will likely remain the main concerns for investors," says an excerpt from the report.
