Tuesday, December 18, 2012

Cerberus Moves To Ditch The Freedom Group

The Wall Street Journal is reporting that Cerberus Capital Management plans to sell their firearms manufacturing arm in the wake of the Newtown tragedy. Their statement below says that they don't want to be pulled into a national political debate concerning firearms.

Cerberus Capital Management Statement Regarding Freedom Group, Inc.

NEW YORK, Dec. 18, 2012 /PRNewswire/ -- We were shocked and deeply saddened by the events that took place at the Sandy Hook Elementary School in Newtown, CT on December 14, 2012.  We cannot comprehend the losses suffered by the families and friends of those killed by the unthinkable crimes committed that day.  No words or actions can lessen the enormity of this event or make a dent in the pain that was inflicted on so many.
In 2006 affiliates of Cerberus Capital Management, L.P. made a financial investment in Freedom Group.  Freedom Group does not sell weapons or ammunition directly to consumers, through gun shows or otherwise.  Sales are made only to federally licensed firearms dealers and distributors in accordance with applicable laws and regulations.  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 and ammunition. 
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.  The debate essentially focuses on the balance between public safety and the scope of the Constitutional rights under the Second Amendment. As a Firm, we are investors, not statesmen or policy makers.  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.
There are, however, actions that we as a firm can take.  Accordingly, we have determined to immediately engage in a formal process to sell our investment in Freedom Group.  We will retain a financial advisor to design and execute a process to sell our interests in Freedom Group, and we will then return that capital to our investors.  We believe that this decision allows us to meet our obligations to the investors whose interests we are entrusted to protect without being drawn into the national debate that is more properly pursued by those with the formal charter and public responsibility to do so.
Our thoughts and prayers are with the families and communities impacted by this tragic and devastating event.
The Freedom Group which has been renamed Remington Outdoor Company, Inc. consists of Remington, Bushmaster, DPMS/Panther Arms, Remington Military, Remington LE, Parker Gunmakers, Barnes Bullets, Advanced Armament, Tapco, Dakota Arms, Marlin, Para-USA, H&R, Mountain Khakis, and Remington PMPD.

Among the upper management of Cerberus are such political figures as former VP Dan Quayle and former Treasury Secretary John Snow. Steve Feinberg, CEO of Cerberus, is reportedly an avid hunter and shooter. According to the Journal, Cerberus came under pressure from certain investors to sell the unit.
Cerberus's statement comes shortly after it faced pressure Monday from former New York Governor Eliot Spitzer as well as the California State Teachers Retirement System, which said it is reviewing a $500 million investment commitment to the New York-based private-equity firm.
 I find the move by Cerberus to sell Freedom Group aka Remington Outdoor Company much more disturbing than the nonsense coming from the gun prohibitionists and their politician allies. To me it seem a great harbinger of the difficulties that lie ahead for us with regards to gun rights. Investment capital companies such as Cerberus are known to make decisions on numbers and fact without dealing in emotion. They obviously feel that the business environment for them will be difficult in the days ahead due to political forces. The Freedom Group companies manufacture a lot of AR-15s and these are the focus of the gun prohibitionists.

For the firearms industry, this move by Cerberus may actually be beneficial. If the new owners of Remington Outdoor Company are not beholden to public employee/union pension funds and other institutional investors, it will be a good thing. The unity of the firearms industry in the face of the threat of legislation is paramount. They don't need the management of one of the major players to go wobbly such as is evident in the response of Cerberus.


  1. This is a bold move by Cerberus. They know that they can make millions by selling stock to ordinary gun owners. All they have to do is make their stock available by public sale and we'll rush out and buy it all up.

    Let me know when it goes on sale. I'm in for at least one share.

  2. They have been looking for a buyer for some time. Odd that they would pick now to do it.

    1. CalPERS is notoriously political and half a billion dollars is a lot of money ... well, in the private sector it is....

  3. Cerberus needs money turnover to thrive. They don't really make anything, they just push cash in and out of various investments. Cashflow is King, moreso with firms like Cerberus than with manufacturers.

    Selling Freedom Group is something they were obviously planning to do for a while. They built a solid portfolio of firms in the market, got them aligned and (more) profitable, trimmed expenses...all the things firms like Cerberus are known to do. The next step - always - is to sell the end result.

    The cash Cerberus needs to continue on will come from the sale. Political pressure is, I suspect, less an issue than losing the money that comes from those pension programs. Again, cash is king.