Anima Educação's shares plummeted by 30% on Wednesday, trading at R$2.02, following the announcement of its acquisition of Faculdades Metropolitanas Unidas Educacionais (FMU). FMU, an educational institution with approximately 51,000 students and campuses in São Paulo, has been in judicial recovery since last year. Analysts widely criticized the deal, which involves an equity value of R$410 million and absorption of FMU's R$150 million debt, leading to an enterprise value (EV) of approximately R$560 million.
Investment banks, including BTG Pactual, Itaú BBA, Citi, J.P. Morgan, Bradesco BBI, and Jefferies, expressed concerns about the transaction. BTG Pactual, for instance, downgraded Anima's recommendation from "buy" to "neutral" and cut its price target from R$7 to R$4. BTG analysts calculated the acquisition's EV/Ebitda multiple at roughly 10 times FMU's adjusted Ebitda of R$53 million over the last 12 months, which is significantly higher than Anima's own EV/Ebitda of about 3.3 times. They argued that the deal compromises the investment thesis built on strong free cash flow generation and efficient capital allocation.
Other analysts echoed these sentiments, highlighting the high valuation and the risks associated with acquiring an asset in judicial recovery. Safra analysts noted that while FMU is a strong brand, the turnaround of a distressed asset presents significant execution risks. They estimated that Anima's net leverage ratio would increase from 2.39 times in Q1 to approximately 2.73 times post-acquisition, raising concerns about the company's sensitivity to execution and cash generation, especially if interest rates remain high. The initial payment for the acquisition is R$240 million, with a second installment of at least R$170 million due three years after CADE approval or by December 31, 2029.
Critics from BTG specifically stated that the deal represents a "fragile capital allocation decision," suggesting that share buybacks or acquisitions of other listed competitors, even at a premium, would have been preferable due to potentially lower multiples. They emphasized that the acquisition significantly alters the investment thesis for Anima, which had been previously supported by its consistent free cash flow and dividend potential. The market reacted strongly, with Anima's shares leading the decline on the B3's Small Caps index.
While some analysts, like those from Safra, acknowledge the strategic potential of acquiring a strong brand in Brazil's largest higher education market, they emphasize that the entry multiple does not fully reflect the asset's normal earnings potential, which has been depressed by years of financial difficulties. Nevertheless, the consensus among analysts is that the valuation and increased leverage should be the primary concerns for investors, contributing to the substantial drop in Anima's stock price.
