The Brazilian book market was surprised last week by the acquisition of Saraiva Group’s publishing divisions, known as Editora Saraiva, by the educational group Abril Educação. The transaction, made public on June 18, brings together the two largest publishing operations in Brazil. There were rumors in the industry that something big was going on at Saraiva, but the secret had been well kept.

The transaction value was R$725 million ($237 million), including debts and loans estimated in R$250 million. The deal includes all of Saraiva’s school system business, as well as all its publishing imprints, of which Benvirá is the trade one. Saraiva’s retail business, however, is not being sold. This means that the largest bookstore chain in Brazil will remain intact in its ownership structure.

The Saraiva Group had revenue of R$2,275 million in 2014, from which R$532 was generated by the publishing division. The group’s EBITDA was R$111 million last year, but the publishing division alone generated R$79 million.

Aside from being an important educational publisher, Saraiva is the main player in the bookselling business in Brazil, with a market share of at least 20%. The group owns 115 stores which draw over 60 million customers per year. The company's e-commerce operation, for books, is also one of the largest in the country; it maintains over 2.3 million active customers. Moving forward, the retail business will be Saraiva's sole focus. This is a move which brings the company back to its origins, as it initially started as a law bookstore in downtown São Paulo in 1914.

“We are very excited and energized with our retail channel,” said Jorge Saraiva Neto, Saraiva’s CEO, in a conference call with investors. “After this operation, [retailining] will be our main focus and we believe we will reach the higher levels of EBITDA that we had in 2011 and 2012,” he said. The company has no plans to distribute the cash generated by the transaction among the shareholders and will use it, instead, to invest in the retail business.

Abril Educação is the largest Brazilian company in the basic education segment. Its portfolio includes learning systems, schools, language courses and publishers Ática an Scipione. In 2014, the group’s revenue was R$1,265 million, with an EBITDA of R$389 million.

The transaction will need the approval of CADE, Brazil's Council for Economic Defense. The companies expect a decision to take place before the end of the year. If approved, Abril Educação will become a giant educational publisher in Brazil, heavily present in both K12 and higher education.

Carlo Carrenho is publisher of Brazil's PublishNews.