Dragoneer, General Atlantic Take Stakes in Brazil’s Arco
(Bloomberg) -- Dragoneer Investment Group and General Atlantic are investing $150 million in the publicly traded Brazilian education technology company Arco Platform Ltd.
The private investment in public equity, or PIPE, will be through convertible notes that mature in seven years, according to a statement reviewed by Bloomberg News.
Arco rose as much as 13% on the news and was up 12% at $19.31 a share at 2:21 p.m. in New York.
The notes will convert at an agreed price of $29 a share, a 68% premium to Arco’s closing share price of $17.30 on Wednesday. The price is a 65% premium to the volume weighted average of the stock’s trading in the past 30 days, the companies said.
Dragoneer partner Eric Jones said his firm invested in Arco because it’s a leader in a fast-growing educational market.
Jones expects Dragoneer to make other investments structured as PIPEs. “Public is a very big part of what we do,” he said.
Arco raised $224 million in its U.S. initial public offering in 2018. Its shares are currently trading below its IPO price after a 57% decline through Wednesday. With Thursday’s gains, the company has a market value of $1.1 billion.
Ari de Sá Neto, Arco’s founder and chief executive officer, said the capital infusion from Dragoneer and General Atlantic may end up being used for acquisitions. JPMorgan Chase & Co. advised Arco on the transaction.
“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,” de Sá Neto said in an interview.
Arco announced in March that it had acquired two K-12 learning systems, COC and Dom Bosco, from Pearson Education do Brasil Ltda.
The shortcomings of Brazil’s education system creates a need for Arco, de Sá Neto said.
“We don’t have a public education with a quality that we deserve so that makes families send their kids to private schools,” he said.
©2021 Bloomberg L.P.