Afya Limited Announces Closing of the Acquisition of UNIGRANRIO

Rhea-AI Summary

Afya Limited (Nasdaq: AFYA) has successfully closed the acquisition of Companhia Nilza Cordeiro Herdy de Eduação e Cultura (UNIGRANRIO) for an enterprise value of R$700 million, including R$73.9 million in net debt. The payment structure consists of 60% in cash and 40% in four annual installments. This acquisition enhances Afya's educational capacity, adding 308 medical school seats and increasing total medical seats to 2,611, projecting a net revenue of R$343.2 million for 2023. The acquisition is expected to boost margins and deliver a 9% CAGR in medical student enrollment by 2026.

Positive

• Acquisition of UNIGRANRIO increases medical school seats to 2,611.
• Projected net revenue of R$343.2 million for UNIGRANRIO in 2023, up from R$263.1 million in 2020.
• Expected 9% CAGR in medical student enrollment from 2020 to 2026.
• Quality distance learning operation with maximum CI score of 5, enhancing margins.

Negative

• 40% of the acquisition price is contingent on future cash payments, introducing financial obligation risks.

Afya Limited, or Afya (Nasdaq: AFYA) in addition to the Press Release released by the Company on May 27, 2021, today announced the closing of its acquisition, through its wholly-owned subsidiary Afya Participações S.A., of 100% of the total share capital of Companhia Nilza Cordeiro Herdy de Eduação e Cultura (“UNIGRANRIO”).

The aggregate purchase price (enterprise value) was R$700.0 million, including the assumption of estimated Net Debt of R$73.9 million. The equity value was paid 60% in cash on the date hereof and 40% will be paid in four equal annual installments, adjusted by the CDI rate. We expected an EV/EBITDA of 4.1x at maturity and post synergies.

UNIGRANRIO is a post-secondary education institution with government authorization to offer on-campus, undergraduate medical, and health-related courses in the state of Rio de Janeiro and has the best academic quality among for profit universities in the state.

The acquisition contributed 308 medical school seats to Afya, increasing Afya’s total medical school seats to 2,611. This translates to 18,799 medical students at maturity, representing a 9% CAGR from 2020 to 2026. UNIGRANRIO distance learning also has a high quality operation, scoring a CI of 5 (maximum quality evaluation) and its expertise will help to improve margins of Afya’s ex-Health undergraduate courses.

The reported Net Revenue for 2020 was R$ 263.1 million of which 49% comes from medical courses and 68% from all health-related courses (including medicine). The 2023 projected Net Revenue for UNIGRANRIO is R$ 343.2 million at full maturity, with medical courses representing 71% of this amount and 85% considering all health-related courses.

There are 82 additional seats still pending approval. If approved by the Ministry of Education, will result in a potential additional payment structured as follow (I) if the approval is granted in the first year after the acquisition, R$ 1.1 million per seat (II) if the approval is granted in the second year after the acquisition, R$ 1.0 million per seat. (III) if the approval is granted between the third and fourth year after the acquisition, R$ 0.9 million per seat.

About Afya:

Afya is a leading medical education group in Brazil based on number of medical school seats, delivering an end-to-end physician-centric ecosystem that serves and empowers students and physicians to transform their ambitions into rewarding lifelong experiences from the moment they join us as medical students through their medical residency preparation, graduation program, continuing medical education activities and offering digital products to help doctors enhance their healthcare services through their whole career.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210804006154/en/

FAQ

What is the purpose of Afya's acquisition of UNIGRANRIO?

The acquisition aims to enhance Afya's educational capacity and market presence in medical education.

What is the total purchase price for UNIGRANRIO?

The total purchase price for UNIGRANRIO is R$700 million, including R$73.9 million in net debt.

How will the acquisition affect Afya's financial performance?

The acquisition is projected to increase net revenue and student enrollment, positively impacting financial performance.

What are the expected benefits of acquiring UNIGRANRIO?

Benefits include increased medical school seats, enhanced quality of education, and improved profit margins.

When is Afya expected to realize the revenue benefits from UNIGRANRIO?

Projected revenue benefits from UNIGRANRIO are expected to materialize fully by 2023.