After Outcry, Wall Street Firm That Owns Maker Of Newtown Rifle Exiting Firearms Industry

by Categorized: Corporate finance, Defense, Manufacturing, Politics, Wall Street Date:

The private equity firm that owns Remington Arms, Marlin Firearms and Bushmaster, which made the gun used in the Newtown killings, is selling the businesses as a result of the outcry over weapons since Friday.

Those gun-makers and several others are part of a company called Freedom Group, which has become a dominant force in the firearms industry over the last five years.  Freedom Group was assembled and is 95 percent owned by Cerberus Capital Management, which said in a statement released Tuesday that it will sell the group of companies.

The statement was highly unusual in the private equity world, in which firms typically say little or nothing about their investment decisions other than in financial filings.

“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. “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.”

The firm has a close connection to Newtown: The 86-year-old father of Stephen A. Feinberg, the billionaire financier who founded and heads Cerberus, lives in a private community in the town.

I couldn’t reach either Feinberg Tuesday, and the company did not comment on whether Stephen Feinberg visited Newtown or talked with people in the town before making the decision to divest.

Some people in Newtown, hearing about the decision Tuesday, considered it a magnanimous and noble move.  But it also comes at a time when the firearms industry — which sells a significant number of semi-automatic rifles and pistols — is under intense pressure as a result of the massacre.

On Monday, the California state treasurer instructed that state’s retirement funds to re-evaluate and possibly sell its investments in companies that make firearms that are illegal in California — including the Bushmaster AR-15-style rifle used by the gunman in Newtown, Reuters reported.

CalPERS, the California Public Employee Retirement System, has committed $400 million to Cerberus’s latest, $3.5 billion fund, Reutrers reported, citing public records.

“The Treasurer’s view is that neither fund should be invested in any company that makes guns that are illegal in this state, especially ones that were used to kill 20 innocent children and six innocent adults,” Tom Dresslar, a spokesman for California Treasurer Bill Lockyer.

A group called New Yorkers for Sensible Gun Control called for a vigil at Feinberg’s East Side townhouse Tuesday evening, and noted on a web site that the event would go on despite the Cerberus announcement.

Cerberus bought Bushmaster in 2006 and formed Freedom Group, including Remington Arms, the historic gunmaker founded in New York in 1816 and later located in Bridgeport. Freedom Group in 2008 bought Marlin, which was founded in 1870 by a former Colt worker.

In 2011, Freedom Group closed several plants, including the Marlin factory in North Haven, which had employed 365 people in 2008.

Advocates for a ban on assault weapons are calling for immediate legislation and many are saying the Newtown tragedy will be a tipping point in the long debate about how to control military-style weapons.  In my column posted Monday, I note that a ban will be extremely difficult to enact, will not work unless it’s part of a broader set of measures and will not be a large part of the solution to gun violence in America.

It’s unclear how much of the Freedom Group profits come from military-style firearms. The main industry groups, including the National Rifle Association and the National Sport Shooting Association, which is based in Newtown, have remained mum since the tragedy but NRA said it will have a major announcement Friday.

Yet to be seen is how the sale of Freedom Group will affect the national debate, and the firearms industry. Shares of the two publicly traded gunmakers — Sturm, Ruger & Co. of Fairfield and Smith & Wesson of Springfield — were each down 15 percent and 21 percent, respectively, from Friday morning to Tuesday’s close, but both are up dramatically from three years ago.

Cerberus put its move in perspective: “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.”

 

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25 thoughts on “After Outcry, Wall Street Firm That Owns Maker Of Newtown Rifle Exiting Firearms Industry

  1. Finn

    Cerberus is controlled by George Soros, a former KGB collaborator in Hungary and one of the leading donors and influences of the Democratic Party.

    He turned in his friends once for privileges, why not again?

      1. Ken

        How absurd is it that the second largest gun lobby group, National Shooting Sports Foundation and owners of the world’s largest gun show are also headquartered in Newtown. They are spending millions to ensure the AR15 is available to all because, they say its “FUN”.

  2. AMERICA IS DYING

    How is The War On Drugs Working? Apply that to Gun Control. Brain Washed American Sheep!

    “Adam had a lot of mental problems.” It’s time to address mental illness and Not Gun Control! Just like The War On Drugs is working? Lockup people with mental illness and addiction instead of addressing the root of the problem.

    Thomas Jefferson made the following observations: “No free man shall ever be debarred the use of arms.” “The strongest reason for the people to retain the right to keep and bear arms is, as a last resort, to protect themselves against tyranny in government.”

    1. Jimmy Boggs

      Wasn’t he the guy who owned about 100 slaves?

      Ok, since you want to use 18th century reasoning, let’s allow only flint lock rifles for purchase by anyone including you.

      1. glenn hamilton

        Our country’s founding fathers had it right.
        Look at Egypt, Syria,Iran. I bet you they wish they had a second amendment.

        1. AMERICA IS DYING

          Exactly!
          At least there is one American here who isn’t a Brain Washed Sheep like the rest of them!

    2. joseph

      Um, yeah, “mental problems” that they are still hypothesizing on, so I wouldn’t jump so fast to judge. There’s no evidence of him taking any medications nor a history of mental problems. And you do realize you’re making a quote by one of the founding fathers right? a statement made over 300 years ago? that’s an antiquated statement. An irrelevant issue at best. The government has too many checks and balances to ever get THAT corrupt.

  3. Diane

    Yeah, right. All of a sudden they became altruistic. They’re selling off a company whose best-selling product is about to be banned. They’re cutting their losses. It’s not like they’re ceasing the manufacture of firearms. They’re just passing the company on to somebody else.

    1. Jimmy Boggs

      Diane, not so quick. It will remain a very profitable enterprise. They also make guns for police departments and armies around the world. And that business is still in growth. I think morality had some play in the decision to sell.

      1. Mitch

        Morality .. and a certain Calif. Teacher Pension Fund that was heavily invested in it potentially pulling its money out … imagine, such a group being invested in a company that owns a firearms manufacturer.

  4. Mitch

    Again .. quick to start talking about assault weapons, which were not used in this horrible event. I’m hoping that Mr. Haar will look into doing some reporting on how the Sen. Diane Feinstein-led assault weapons ban of 1994-2004 led to absolutely no decrease in gun crimes in the country, according to government studies. Also, double check how often an assault weapon has been used in a crime in the U.S.

    Some great comments here from Sen. Feinstein on guns: http://www.mrctv.org/videos/feinstein-1995-her-concealed-carry-permit-i-know-urge-arm-yourself-because-thats-what-i-did — well worth a listen. This is very important to understand, especially hearing it from the author of the assault weapons bad.
    Let’s focus on the mental health aspect and how many facilities have been closed over the last 15-20 years and how it is mentally ill people commiting these crimes, not people who are law abiding and legal owners of firearms.

    The big question is this: will Mr. Haar and the media in general even consider taking that angle, or is it just too easy to say let’s put another assault weapon ban in place…..

    1. Jimmy Boggs

      Mitch; I agree that the assault rifle ban was worthless. This is why I am calling for the repeal of the 2nd amendment. It will take a long time to clean up the guns. Perhaps 100 years. But thi is the only solution.

    2. keith baker

      No assault rifle was used? Wake up. I have had my fill of scared, impotent second ammendmenters clinging to a ridiculous notion that your little pea shooters would somehow save us all from the wrath of the military should our government ever become tyranical. Grow up.

      I don’t care what kind of death and destruction you want to be able to rein in your own home, but leave me and my kids out of your Superman fantasy. I don’t feel any safer knowing there’s a bunch of heroes in waiting looking for “bad guys” to shoot. Violence against our own species is unnatural and it should feel that way. We all owe ourselves and humanity the obligation of doing what is right and not just what is legal. Stop embracing violence as recreation and start conntributing our efforts to lift each other from the shadows we chose to live in. All of us. Myself included.

      1. Mitch

        Keith .. what about the mental health issue which is obviously the biggest factor here. Sounds like everyone in this very small town knew that Lanza was nuttier than a fruitcake. It also appears that his mother was the one sheltering him from the world and basically enbabling all of this for years and years. Think about it, do law-abiding people who own guns do things like this? In all of these shootings, it wasn’t a law-abiding gun owner that committed the crime, it was a mentally ill person. There needs to be gun control measures in place, certainly, but no one is talking about the mental illness that is rampant in this country and the fact that more and more facilities are closed. Treatment is key. You can ban all you want, but sick people will do bad things.

        1. Dan Haar Post author

          We and other media outlets are writing about the mental health issue. There is wide recognition that that’s as critical as gun control. Both are extraordinarily difficult issues to tackle — you can’t just tighten gun laws and throw money at mental health providers and expect any improvement.

  5. DAVID

    I BELIVE THAT THE STATES SHOULD TRY TO PROVIDE SECURE
    GUN CABINET SAFES & BIO METRIC HAND-FINGER CONTROL TO
    OPEN. CT IS QUICK TO PASS UNFAIR KNEE JERK LAWS.
    IF SAFES FROM THE MANUFACTURES COULD BE OBTAINED AT
    THERE COST OR LITTLE MORE THEN FIREARMS COULD BE MORE
    SECURE. I’M TIRED ABOUT READING BANK ROBBERS WITH GUNS
    OR ARMED HOME INVASIONS AND HOLD-UPS. CHANGE THE LAWS
    THAT IF YOU COMMIT ANY CRIME WITH A DEADLY LIKE ABOVE
    THE SENTENCE WILL AUTOMATICALLY BE TWICE THE TIME.
    DON’T DO THE CRIME DAVID

  6. joseph

    I highly doubt that the government will EVER become tyrannical because there are too many checks and balances on top of even more checks and balances to even think about it.

  7. julian

    The price of the second ammendment shouldnt be the massacre of 5 year olds
    The value of the paranoia that prevails with these gun freaks shouldnt be our concern and the life and safety of our citizens comes before any so called rights to bear weapons of terror and mass destruction

  8. Mike

    Lots of talk about law abiding and legal gun owners…
    This kid was a law abiding citizen until 9:38AM Friday morning!

  9. Mark Cherrington

    Cerebrus should be applauded for selling their gun companies, and applauded again for being public about it. It begs the question, though, why they ever bought those companies in the first place, especially considering the way they emphasize the teachers and firefighters whose pensions depend on their investments. They are at pains to portray themselves as simple, humble investors trying to do the right thing for the most noble Americans. But if that were true, they would never have invested in companies that make products designed expressly–and solely–to kill people. Invoking the name of teachers and firefights in this context is reprehensible.

    As though sensing the fly in that oitment, they then hurry to point out that they are “investors, not statesmen or policy makers,” as though that implied objectivity absolves them of any responsibility for their actions. It doesn’t. The world is full of unimaginable misery, destruction, and death–and now the loss of 20 innocent children–all caused by the actions of people who hide behind the shield of “it’s only business.” That excuse no longer is an excuse.

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