Cerberus to sell stake in gunmaker after shootings
Mourners comfort each other as they leave a funeral service for six-year-old Noah Pozner in Fairfield, Conn., on Monday, Dec. 17, 2012. Pozner was killed in a shooting at Sandy Hook Elementary School in Newtown, Conn. (AP Photo/Jason DeCrow)
Published Tuesday, December 18, 2012 8:51AM EST
Last Updated Tuesday, December 18, 2012 3:19PM EST
The largest firearms maker in the United States said Tuesday it is being put up for sale by its owner, which called last week's school shooting a "watershed event" in the national debate over gun control.
Freedom Group International makes Bushmaster rifles, the weapons thought to have been used in Friday's killings in Connecticut of 28 people, including 20 young children and the gunman. It was one of the worst mass shootings in U.S history.
The New York-based private equity group Cerberus Capital Management -- which invests money on behalf of public employees like teachers, among other clients -- said it will sell its controlling stake in the company, while investors fled other firearms makers.
Shares in publicly traded gun makers were dropping for a third straight day.
"It is apparent that the ... tragedy was a watershed event that has raised the national debate on gun control to an unprecedented level," Cerberus said in a statement. Cerberus owned 95 per cent of Freedom Group, according to a year-end 2011 filing for the gun maker on its website.
The White House said President Barack Obama was "actively supportive" of efforts in Congress to reinstate an assault weapons ban, and long-held political opposition to gun control was shifting among some Republicans, who said they were now willing to discuss the issue.
A representative for Freedom Group could not be immediately reached for comment. A Cerberus spokesman did not return a phone message.
Cerberus put Freedom Group together by buying Bushmaster, Remington, and other well-known gun brands starting in 2006. Friday's gunman used what is believed to have been a Bushmaster military-style rifle, the 223-calibre Bushmaster AR-15.
The AR-15 rifle is a civilian version of the military's M-16. Versions of the AR-15 were outlawed in the U.S. under the 1994 assault weapons ban, but that law expired in 2004, and Congress failed to renew it under immense pressure from the gun lobby.
Freedom Group said it is the country's largest firearms manufacturer. It sold 1.1 million rifles and shotguns last year, along with 2 billion rounds of ammunition. Its products are sold to law enforcement and military customers, as well as retailers who sell them to hunters and gun enthusiasts.
Freedom Group noted in its 2011 filing that new laws similar to the expired assault weapons ban "could have a material adverse effect on our business."
Cerberus attempted to distance itself from the gun control debate on Tuesday.
"It is not our role to take positions, or attempt to shape or influence the gun control policy debate," its statement said. "That is the job of our federal and state legislators."
But the sale may have been influenced by one or more of its clients. The Cerberus announcement came 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.
Money made from the Freedom Group sale will be returned to its investors, Cerberus said.
Meanwhile, shares of other firearms makers were falling.
Shares of Sturm, Ruger & Co. dropped $3.21, or 7.3 per cent, to $40.79 in midday trading Tuesday. They were down 10.5 per cent since Thursday, the day before the shooting. Shares of Smith & Wesson Holding Corp. fell more than 9 per cent to $7.86, down 17.6 per cent from their Thursday close.