Brazilian Education Giants Cogna and Yduqs Revive $1.5 Billion Merger Talks

Cogna and Yduqs, Brazil’s two largest higher education groups, have reopened merger discussions after their first attempt failed seven years ago.

The news emerges from recent high-level meetings between company executives to explore combination possibilities. The potential merger would create an education powerhouse serving 2.5 million students across Brazil.

This combined entity would control approximately 30% of Brazil’s private education market with annual revenues exceeding R$8.3 ($1.5) billion. Financial conditions now favor a deal as both companies trade at similar multiples.

Both companies currently trade at approximately 4.5 times their estimated 2025 EBITDA. Cogna reported R$6 billion revenue and R$1.8 billion EBITDA in 2023, while Yduqs posted R$5.1 billion revenue and R$1.6 billion operating profit.

The companies previously agreed to a 50-50 ownership structure but talks stalled over governance issues. Disagreements about board composition and executive leadership selection remain unresolved.

Major shareholders support the deal, including Alaska with 17% of Cogna and Advent with 15% of Yduqs. A key sticking point centers on Cogna’s basic education business. Cogna insists on including its Vasta division and textbook business in the merger.

Yduqs shows no interest in acquiring these operations. Vasta, listed on Nasdaq, generates approximately R$400 million in EBITDA from teaching systems like Anglo and pH.

Brazil’s Distance Learning Market Sees Merger Reconsideration

Brazil’s antitrust regulator CADE previously rejected their merger attempt based on distance learning market concentration concerns. Market conditions have changed significantly since then.

New competitors have entered the market, reducing their combined distance learning share from 40% to about 25%. Expense synergies represent the main potential value driver.

Analysts estimate cost savings of 20-40% on combined general and administrative expenses. These reductions could generate billions in equity value for shareholders.

The education sector faces challenging conditions. Industry revenue declined from R$71 billion in 2015 to R$58 billion in 2022. This drop followed reductions in Brazil’s student financing program FIES, creating pressure for consolidation.

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