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Cerberus shops Freedom Group

by Lou Whiteman  |  Published December 18, 2012 at 12:16 PM
Private equity giant Cerberus Capital Management LP said Tuesday it would seek buyers for gunmaker Freedom Group Inc., responding to apparent pressure from investors following last week's school shooting in Connecticut.

Madison, N.C.-based Freedom is a rollup of gun and ammunition companies including Bushmaster Firearms, Remington Arms, DPMS Firearms and Marlin Firearms. Bushmaster is the manufacturer of the rifle used by the gunman in Newtown, Conn., who last week killed 27 people, including 20 young students, and in doing so revived the national debate on gun control.

Cerberus in a statement said it has retained an adviser to sell Freedom, which it has owned since 2006, in response to the tragedy.

"It is apparent that the Sandy Hook tragedy was a watershed event that has raised the national debate on gun control to an unprecedented level," Cerberus said in the statement. The firm said it believes the decision allows it to meet obligations to investors "without being drawn into the national debate."

At least some Cerberus investors will surely be thankful for the separation. The California State Teachers' Retirement System was put in the spotlight following the shooting by Fortune Magazine, which noted that CalSTRS is a major investor in the Cerberus fund that financed Freedom.

CalSTRS said Monday it was reviewing its investment in Cerberus.

It is unclear who might be interested in taking this hot potato from Cerberus. The business is of little interest to major defense contractors, and other private equity firms could be reluctant to take on an investment in the current climate and face criticisms from its limited partners similar to the heat Cerberus is now facing from CalSTRS.

Another firearms company, Colt Defense LLC of West Hartford, Conn., is also owned by private equity but sells mostly to law enforcement officials.

Cerberus in its statement took pains to separate Freedom from recent events, noting that the company "does not sell weapons or ammunition directly to consumers" but rather to federally licensed dealers and distributors. "We do not believe that Freedom Group or any single company or individual can prevent senseless violence or the illegal use or procurement of firearms," Cerberus said.

Freedom in 2009 had filed to go public but withdrew the registration statement two years later due to setbacks including the slow economy and the September 2010 departure of CEO Theodore Torbeck. Cerberus tapped former Home Depot Inc. CEO Robert Nardelli as temporary chief, but Nardelli stepped down from his role at Freedom and ended other ties to Cerberus in March.

The company recorded sales of $677.3 million in the nine months ended September.

Tags: Bushmaster Firearms | California State Teachers' Retirement System | CalSTRS | Cerberus Capital Management LP | Colt Defense LLC | DPMS Firearms | Freedom Group Inc. | Home Depot Inc. | Marlin Firearms | Remington Arms | Robert Nardelli | Theodore Torbeck

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