Florida teachers say they want no part of Edison buyout
Consistently a lightning rod for criticism, Edison Schools Inc. finds itself in the midst of another storm of controversy over the impending buyout of the company – a deal to be financed with retirement funds of Florida teachers and other state employees.
Assets from Florida’s retirement system, managed by the New York investment firm Liberty Partners Inc., are to provide the financing for a move by Edison’s executives to buy up the company’s stock and take the company private. Edison stock has been languishing at less than $2 a share on the Nasdaq. Many say going private would make the company less of a high-profile target for critics.
Officials at Edison, the for-profit firm that took over management of twenty schools in Philadelphia last year and runs a hundred schools nationwide, say the buyout will have no effect on its operations in Philadelphia or other school systems.
The $174 million buyout deal involving Liberty Partners was first announced by Edison executives in July, but it was not until late September that the news broke, in a Wall Street Journal article, that Liberty was entirely relying on Florida state retirees’ money to finance the deal. The sale still has to be approved by Edison’s shareholders.
That is expected to happen during a November 12 shareholder meeting in New York, but Florida teachers and others say they will be there to oppose it.
Some of Florida’s retirees – nearly half of whom are current or retired public school employees – are not happy to be providing the sole source of funding for taking the company private. The deal’s critics, including the Florida Education Association, say it is a bad investment for retirees and represents a bailout of a failing company they find repugnant because it privatizes school management.
Both Sandra Feldman, president of the American Federation of Teachers, and Reg Weaver, president of the National Education Association, have joined several Florida state legislators in denouncing the deal.
But the power to authorize investment decisions rests with the three members of Florida’s State Board of Administration, which oversees the retirement system. The members are three Republican state officeholders, including Governor Jeb Bush, who denies that he had any advance knowledge of the Edison buyout plan. None has expressed reservations about the deal.
Florida Education Association spokesperson Mark Pudlow said that Bush "has had a strong privatization agenda." But the fund’s administrator insists Edison is just a shrewd investment by Liberty.
In an October 30 letter to Bush, Feldman called for a public review to evaluate whether the investment was in the best interest of retirement plan members.
"As retirement systems typically limit the amount of stock owned in any one company to five percent or less, this particular investment, on its face, appears to ignore the prudence rule," she wrote.
Weaver also sent a letter of protest to Bush. "It seems to me that given Edison’s poor performance, sizable debt, and limited future prospects, the retirement savings of Florida’s public education employees may be at risk," he said.
According to Pudlow, the Florida Education Association is still pursuing political channels to stop the buyout, and members will be at Edison’s shareholder meeting in New York to protest it.
Edison spokesperson Adam Tucker took issue with the view that the company privatizes jobs or is anti-union. "Collective bargaining agreements remain in place at our schools. We understand completely that for our schools to achieve success we must work in collaboration with unions," he commented.
While Edison has so far come up with only one profitable quarter in its 12-year history, the buyout appears to be a windfall for Edison’s CEO Chris Whittle. The buyout agreement promises a boost in his salary to "no less than $600,000." A Fortune magazine analysis of the agreement concluded that Whittle stands to make as much as $21 million in all from the transaction.