Education Alternatives to offer shares Company hopes to raise $28 million

April 24, 1993|By Ian Johnson | Ian Johnson,New York Bureau

NEW YORK -- Only a year after raising $2 million from the stock market, Education Alternatives Inc. is going back to the well next week, hoping this time to raise $28 million for its plan to overhaul U.S. schools through private enterprise.

The Minnesota-based company, which manages nine Baltimore schools under a five-year contract nominally worth $133 million, said the additional money would be used as working capital and to develop future services.

The company plans to sell 1.26 million shares at $22.25, below the recent trading price of $25. Yesterday, Education Alternatives' stock closed at $25.125, up 12.5 cents.

Citing legal constraints related to the new stock offering, the company would not comment on its plans for the cash infusion. It has said in the past, however, that it planned to develop educational products related to its Tesseract teaching method and needs more capital to refurbish the Baltimore schools.

Formed originally to run private schools using the Tesseract method, which features extensive use of computers, smaller class sizes and more flexibility for students, Education Alternatives has moved over the past three years into public education. The private schools had not been profitable, though the company said they broke even last year.

First as consultants in Miami and then starting last year as managers of the nine inner-city Baltimore schools, Education Alternatives has become nationally known by its claim that it can improve education and make a profit with the same funding appropriated to public schools.

For the three months ended Dec. 31, the most recent period for which figures were available, Educational Alternatives reported a $235,000 profit, its first.

Although profitable after losing more than $6 million, Educational Alternatives recently suffered a setback when it withdrew a proposal made to the Palm Beach County School Board to manage 14 county schools.

The county decided to set up a task force to study the concept of hiring private companies to run private schools and will establish a competitive bidding process next year. Education Alternatives has not decided if it will participate in the bidding process.

In Baltimore, the company has won high marks for renovating the schools, but has drawn some criticism from teachers' unions for replacing unionized teaching assistants with lower-paid employees.

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