Cerberus to sell gun maker Freedom Group in wake of Connecticut shootings
BY MICHELLE CHAPMAN Associated Press
Wednesday, December 19, 2012
12/19/12 at 3:12 AM
NEW YORK - Private equity giant Cerberus will sell the firearms company that produced one of the weapons believed to have been used in the shootings at an elementary school in Newtown, Conn., calling it a "watershed event" in the national debate on gun control.
Cerberus Capital Management LP said Tuesday that it would sell its stake in Freedom Group Inc., which stood at 95 percent as of a 2011 regulatory filing. Madison, N.C.-based Freedom Group owns the Bushmaster rifle brand, as well as Remington and other gun makes.
On Friday, 20 children were killed, 27 people in all including the gunman, at Sandy Hook Elementary School in one of the worst mass shootings in U.S history. The gunman, Adam Lanza, is believed to have used a .223-caliber Bushmaster AR-15 semiautomatic rifle in the attack.
The AR-15 is a civilian version of the military's M-16, which can fire three-round bursts of automatic fire. Versions of the AR-15 were outlawed in the U.S. under the 1994 assault weapons ban, which expired in 2004. Congress did not renew it under pressure from the gun lobby.
Cerberus, however, is distancing itself.
"We are investors, not statesmen or policy makers," the company said in a statement. "Our role is to make investments on behalf of our clients who are comprised of the pension plans of firemen, teachers, policemen and other municipal workers and unions, endowments, and other institutions and individuals. It is not our role to take positions, or attempt to shape or influence the gun control policy debate. That is the job of our federal and state legislators."
And it appeared investors as a whole were ridding themselves of shares in firearms makers this week.
Shares of Southport, Conn.-based Sturm, Ruger & Co. dropped nearly 8 percent Tuesday to finish at $40.60, while Smith & Wesson Holding Corp. of Springfield, Mass., plummeted 10 percent to $7.79.
Cerberus said it was deeply saddened by the shooting, and that it will hire a financial adviser to help with the process of selling its interests in Freedom Group, a major firearms manufacturer which, in addition to Bushmaster, produces Remington Arms.
A representative from Freedom Group could not be reached for comment.
The announcement comes one day after the California State Teachers Retirement System, a large pension fund, told The Wall Street Journal that it was reviewing its $500 million investment commitment to Cerberus because of the firm's stake in Freedom Group.
A representative for the California State Teachers Retirement System could not be immediately reached for comment on Tuesday.
Cerberus affiliates made an investment in Freedom Group in 2006. The New York firm said Freedom Group does not sell weapons or ammunition directly to consumers, and that it does not believe that "Freedom Group or any single company or individual can prevent senseless violence or the illegal use or procurement of firearms and ammunition."
Cerberus makes investments on behalf of clients that include the pension plans of firemen, teachers, policemen, and other municipal workers and unions, endowments and other institutions and individuals.
Original Print Headline: Cerberus places firearms maker on the market
Freedom Group International
Headquarters: Madison, N.C.
Brands: Bushmaster, Remington, and DPMS.
Guns sold: 1.1 million long guns.
Annual revenue: $775 million, including firearms revenue of almost $426 million.
Results: Net loss of $6.7 million. It has lost money in each of the last five years except for a $54 million profit in 2009.
Ownership: 95 percent by Cerberus, the rest by Freedom Group directors.
Source: 2011 Regulatory filings.
A Bushmaster AR-15 semiautomatic rifle — the model used to kill children and school personnel Friday in Newtown, Conn. — and ammunition are displayed at Seattle Police headquarters in 2006. The weapon's maker, Freedom Group Inc., was put up for sale Tuesday by Wall Street private equity firm Cerberus Capital Management LP. Associated Press file