Yduqs Participações (YDUQ3) M&A announcement summary

Deal rationale and strategic fit

• Merger creates Brazil's largest higher education platform, spanning all 26 states with 176 campuses and nearly 6,000 medical seats, serving up to 1.6 million students and establishing a national reference in premium and medical education.

• The combined entity leverages complementary strengths in medicine and premium education, broadening exposure to resilient, high-margin segments and supporting physicians throughout their careers.

• Diversification into health-related and premium education segments, with a focus on lifelong learning, innovation, and social impact, including free medical consultations for underserved regions.

• Organizations have complementary geographic footprints with limited overlap, enhancing national reach and operational efficiency.

• Combined company aims to intensify exposure to premium and medicine, maintaining a horizontal presence in higher education.

Financial terms and conditions

• Stock-for-stock merger with Afya shareholders owning 69% and YDUQS shareholders 31% of the combined company; Bertelsmann will be the largest shareholder with 47%.

• 45% premium to VWAP for YDUQS shareholders, plus BRL 750 million in extraordinary dividends distributed before closing.

• Combined net revenue of up to BRL 9.5 billion and EBITDA of up to BRL 3.6 billion, with strong free cash flow generation and pro forma leverage of 1.2x net debt/EBITDA.

• Target payout ratio of 50% after NewCo formation, supporting attractive shareholder returns.

• Board appointment rights for key shareholders, with Novo Mercado governance standards.

Synergies and expected cost savings

• Estimated BRL 2–2.2 billion in synergies (NPV), with 80% expected to be captured within three years, validated by an international consulting firm.

• Synergies from SG&A optimization, IT/ERP consolidation, CAPEX avoidance, and revenue expansion through cross-selling and platform integration.

• Additional upside potential from revenue growth in continuing education and expanded campus network.

• Track record of exceeding synergy targets in past mergers, such as Adtalem, with 28 acquisitions since 2020.

• The combination leverages over 400 technology and AI use cases already in production to drive innovation.