By Gabriela Mello and Tatiana Bautzer
SAO PAULO, June 5 (Reuters) - Brazil's antitrust watchdog Cade has demanded asset sales larger than initially expected by the country's largest for-profit college operators, Kroton Educacional SA and Est??cio Participa???ues SA, before it will approve their merger, three people with knowledge of the matter said on Monday.
Cristiane Alkmin, the deal's rapporteur within Cade, held meetings with the companies' executives and lawyers two weeks ago and signaled they would have to commit to selling a large volume of assets, two of the sources said, asking for anonymity to discuss the matter freely.
Options include selling college brand Anhanguera Educacional, acquired in 2013 by Kroton, and Est??cio Participa???ues brand, one of the sources said.
Bloomberg reported earlier on Monday that Cade had requested the sale of Anhanguera to approve the merger.
The $1.7 billion Kroton bid was approved by Estacios shareholders almost a year ago, and on Monday Brazils antitrust watchdog delayed a key ruling on the tie-up.
One of the sources told Reuters that the ruling, originally scheduled for June 7, had been moved to June 28. Newspaper O Globo had earlier reported that the delay came at the request of Kroton.
In February, a preliminary report by the watchdogs economic studies department said the deal could hamper competition and lead to higher costs for consumers. If Cade orders the companies to sell assets equivalent to more than 25 percent of total revenue, one clause in the merger agreement allows the parties to undo the deal without penalties, two of the sources said.
Kroton and Estacio declined to comment.
Shares of both companies were the lead decliners on Brazil's benchmark Bovespa index. Estacio shares fell 7 percent to 15.90 reais and Kroton closed down 3.2 percent to 13.65 reais.
(Reporting by Tatiana Bautzer; Editing by Daniel Flynn and Richard Chang)
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