The New York Times reports: Sitting in their offices high above Park Avenue late on Monday, the private equity executives who own the country’s largest gun company received a phone call from one of their most influential investors.
An official at the California teachers’ pension fund, which has $750 million invested with the private equity firm, Cerberus Capital Management, was on the line, raising questions about the firm’s ownership of the Freedom Group, the gun maker that made the rifle used in the Connecticut school shootings.
Hours later, at 1 a.m. on Tuesday, Cerberus said that it was putting the Freedom Group up for sale.
“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 a statement.
The move by Cerberus is a rare instance of a Wall Street firm bending to concerns about an investment’s societal impact rather than a profit-at-all-costs ethos. Public pension funds like the California one — officially, the California State Teachers’ Retirement System, or Calstrs — have hundreds of billions of dollars in private equity and hedge fund investments. While their influence is vast, it is usually exerted behind the scenes and rarely prompts snap business decisions. [Continue reading…]
It turns out that quite a few gun owners are happy about the sale.
“The Freedom Group came in and consolidated production and just alienated everybody because they bought up these great brands and then destroyed them… it is fu***ng up some of the best brands in the gun world.”
Robert Farago, publisher of the popular gun blog The Truth About Guns, told me that about the Freedom Group a month before the shootings in Newtown, Connecticut, involving its gun brand Bushmaster. It was a month and a few days before Cerberus Capital Management announced it would sell its 95 percent stake in Freedom Group, citing the school tragedy which had, in its words, “raised the national debate on gun control to an unprecedented level.”
Investors saw Cerberus’ move as a surprise (an added wrinkle: the father of the founder of Cerberus lives in Newtown) despite the raging gun debate. But many in the gun owning community saw it as a ray of hope. Finally, maybe, some classic gun brands would be free from an umbrella group that, in the opinion of many, was destroying untold brand value.
“Cerberus is fu***ng up those gun making companies without any help whatsoever from George Soros. Every company they’ve bought is making inferior products to those made before the acquisition, and at higher prices. That’s why it’s important to support the remaining makers (Ruger, S&W, Taurus, Glock, Kel Tec, among others). Cerberus is ruining some great brand names that had long traditions of quality,” wrote user “Rbstern” on a message board back in March.
Freedom Group has faced two distinct problems since buying up some of the most storied names in firearms, including Barnes Bullets, Remington, Bushmaster, Dakota, Marlin, Parker. The first was a rumor that the conglomerate was a holding company owned by liberal boogeyman billionaire George Soros, who, the rumor went, would then close them down. That rumor turned out to be just another wild conspiracy theory but was so string that the NRA itself had to issue an official denial.
