A huge gun investor exits the business

Cerberus Capital, a major private-equity company, is selling the unit that makes Bushmaster rifles. One of those guns is believed to have been used in last week's school shooting.

By Jonathan Berr Dec 18, 2012 1:49PM
Image: Stock market (Corbis)Private-equity group Cerberus Capital is getting out of the gun business, selling the company that made one of the guns used in last week's massacre at a Connecticut elementary school. But its change of heart is a little late in coming.

Cerberus is unloading Freedom Group, which makes the Bushmaster line of weapons. Adam Lanza is said to have used a .223 caliber Bushmaster AR-15 rifle to kill 20 children and six educators Friday. Now, calls for greater gun control are intensifying and at least one investor, the California State Teachers' Retirement System, is reportedly reviewing its business with Cerberus.

Cerberus entered the gun business in 2006 through its investment in Freedom Group. It sent condolences to the families of the victims in a press release Tuesday, but quickly added that its business broke no laws. It also said that it doesn't think "any single company or individual can prevent senseless violence or the illegal use or procurement of firearms and ammunition."

The company emphasized that it is mainly an investor group, not statesmen or policy makers. "It is not our role to take positions, or attempt to shape or influence the gun control policy debate," Cerberus said. "That is the job of our federal and state legislators."

Nonetheless, Cerberus has decided to immediately begin the process of unloading Freedom Group because it didn't want to be drawn into the growing debate over gun control. It's too late for that.

The military-style Bushmaster rifle is a hit with gun enthusiasts. One reviewer on Wal-Mart's (WMT) website noted that "it's as solid as the Colt I carried in Iraq and Afghanistan. It shoots great too! I have put 500 rounds through it with no problems, no misfeeds, no jams."

Though Cerberus noted that Freedom Group doesn't sell its products directly to the public, they are not hard to find. According to a recent SEC filling, the company estimated that about 13% of its sales in the recent quarter came through Wal-Mart. Some retailers, such as Dick's Sporting Goods (DKS), are pulling some semi-automatic weapons from their shelves. Wal-Mart has stopped showing the Bushmaster Patrolman's Carbine M4A3 rifle on its website as well, according to The Nation.

Perhaps Cerberus CEO Stephen Feinberg was motivated by his father Martin, who Bloomberg reports lives in Newtown, Conn., where the massacre took place.
The gun business hasn't been a home run for Cerberus. The firm called off its IPO of the Freedom Group last year. Rates of gun ownership have been plunging for years. Business, however, was rebounding this year and Freedom Group said in the filing that the industry "is currently experiencing a considerable increase in firearms and ammunition demand. In many areas, the market is expanding quicker than the industry can increase production."  

Plenty of hedge funds have benefited from the rising share prices of gunmakers Smith & Wesson (SWHC) and Strum Ruger (RGR), as Business Insider noted.

Whatever upside Freedom Group could bring Cerberus, however, clearly wasn't worth the trouble. Cerberus is worried about its potential legal liabilities and the lasting damage the school shooting will cause to its reputation over the long run. The public and investors shouldn't let the firm, best known for its disastrous investment in DaimlerChrysler, off the hook that easily.

--Jonathan Berr does not own shares of the listed stocks.  Follow him on Twitter @jdberr

More from Money Now

Dec 18, 2012 8:58PM
Well, well, well! It looks more than few cry babies did not like my bashing of cowards and losers like that of a CHILD MURDER like Adam Lanza. Believe me I will never stop as long as these losers exist! Everybody wants to run for cover when the sh_t hits the fan and blame an object like a gun and barely point a shaky finger where the blame belongs. Cowards I say, COWARDS!!! 
Dec 18, 2012 8:42PM
What is wrong with this investment group i sure would not buy any of their products talk about a politically motivated decision what happen in CONN was not the fault of any gun manufacturer when are we going to deal with the real issues I am sick and tired of these anti gun and restrictions to the second amendment good thing we didn't have this mindset on December 7th 1941 ....we all could be speaking german possibly Japanese or  GOD on knows what  this young man and his family have more to do with what happen than the second amendment .......look at t=his history and the true reason will emerge
Dec 18, 2012 7:29PM
it is way, Way too soon to think about making any laws.  Give it time, let the wounds heal a bit, take a nice deep breath... then sit down and have some discussion. Then have some more. Look at it from both sides. then have some discussion. Then if there is a need for a law, write one and  pass it.  Our goverment passes way too many laws as it is. lets face it they only apply to those who cant manipulate they system with money or influence. 
Dec 18, 2012 7:23PM

"Assault Weapon" can be a rock, baseball bat, pencil, even your hands. He could have just as easily killed these women and children with a 1940's style .22 revolver. They were sitting ducks! And for the Syracuse coach, please keep your ignorant, anti-gun political comments to yourself. As long as a criminal may have an "assault weapon" with 30 rounds or more in the magazine, I need to be able to have one to protect myself from them. Gun laws have been demonstrated to not work over and over in other countries as well as here in the states. The most gun-restrictive cities in our country have the highest violent gun-related crimes. The simple reason is that law-abiding citizens are the only people that listen to gun laws! CRIMINALS WILL NOT OBEY GUN LAWS!!!!! The liberals in this country have got to have an agenda.....no thinking person can legitimately say they don't understand this concept.

Dec 18, 2012 7:14PM

Bushmaster is just one of dozens of AR-15 makers.  They flatter themselves if they think they are that significant.  Cerberus is more likely concerned that profits will no longer meet expectations. 


Most AR15 makers just assemble parts from other manufacturers onto their branded receiver.  It ain't rocket science.  The last assault weapon ban actually greatly boosted the sales of AR15s because it eliminated the importation of competing firearms.  As the law was written, all you had to do was remove the bayonet lug and the flash hider and you no longer had an assault weapon.  America felt safer though.

Dec 18, 2012 6:53PM

The problem with society today is a total lack of RESPECT and RESPONSIBILITY.Until people respect one another,and are held responsible for their actions,nothing will change. The objects that people abuse may change,but unless the root of the problem is addressed...individual responsibility  and respect for others, the senselessness will continue...

Dec 18, 2012 5:34PM

This is not an unbiased article of news.  The last sentence of the article destroys any hint of actual journalistic reporting.


Dec 18, 2012 5:23PM

it willl never stop humans have flaws jus like all other creatures we built it and its here to stay legal or illegal eitherway

Dec 18, 2012 4:49PM
The 20 year old man that stabbed all those nursery babies in Brussels was a loner and his description sounds a lot like Adam Lanza's.  I haven't thought all of this out; but, young men are at the center of the problem.  Is it because men are being raised differently these day?.  Is there a mental illness that only attacks young men? Does evil in our society show itself in young men more than women because of biological differences.  If we only blame guns, we are stupid.  They are the least of the problem.  The 20 year old in Brussels used a knife.  There are many weapons.  We need to investigate the physiological basis for this evil.  I am a Christian, and it seems to me when we stopped going to church as a nation, we started having more hate, less love, less guilt, etc., etc.......
Dec 18, 2012 3:31PM
So, So sad that in a country like the USA such violence erupts. If we compare apples to apples look at our neighbors to the south, thousands executed, millions live in fear of being shot, and they have some of the strictest gun laws of any free nation. Abolishing alcohol, did not stop drunk driving or alcoholism.  Upward of 50,000 die annually in vehicle accidents. Food additives and genetic engineering has created all sorts of illnesses to our physical being. FDA approved drugs are constantly being pulled off the market. Has any of these concerns been addressed. Meanwhile hundreds of thousands die annually because of the above listed instruments.

Do we outlaw automobiles, food additives, alcohol? Or what about the latest weapon causing as many deaths as the drunk diver; "The Cellular phone" We invent thousands of useful and good products annually, and then how fast they are converted into implements of war.

Viewers demands pornography, sexually oriented movies, violence and all sorts of vice all under the constitutional right, freedom of speech, we push God out of the schools and demand those in prison read the Bible. The media can do, show and say whatever but no one suppresses their, "Freedom of press, speech and anti-religious propaganda." 

Why is is someone always has to die at the crossroad of no stop sign before someone decides its time for a stop sign? Banning inventions, guns, alcohol, food, and what ever else will not stop the violence, in fact it will only add more fuel to the already run-away locomotive of hate, violence and loose conduct. 

Take note of the gunless countries and compare it to our nation, bombings, torture, slaughter with gross weapons, knives, swords and blunt beatings etc. Stop breeding violence as entertainment, start paying attention to the mentally ill, many who become that way because of the "Freedom to use violence drugs etc in every form of media" It is a virus that is infecting young and old, destroying the moral fiber of a once great society of caring people. Stop breeding violence and immorality and start paying attention to one-another while there may yet be time to turn things around before the USA becomes just another Rome
Dec 18, 2012 3:19PM

The Connecticut school shooting was an unspeakable tragedy.  Words cannot describe the horror that occurred.  Unfortunately, it seems the loudest voices in the media are continually confused about the weapons they push to ban.  Take the sentences above that quote the Wal-Mart customer and change the subject from a gun to a car.  “It drives great too!  I’ve put 500 miles on it with no problems…”  Would the author be equally shocked and “baffled” as to why anyone would need to drive 500 miles with any car?  The reviewer is talking about 500 rounds total, not 500 rounds in a minute or even a single trip to the range.  Guns are and will continue to be prevalent in our country.  We need our politicians to find a way to stop the wack jobs from getting their hands on them, not wave our magic wands and make all guns everywhere disappear.  We also need our media to do some research (or at least think before they publish) and be honest.

Dec 18, 2012 2:00PM
Did we have mass shootings before the tiny little aclu demanded that we take GOD as well as discipline out of schools? NOPE! Did Tim McVay kill hundreds with guns? NOPE! Isn't it odd that shootings are becoming more prevalent now that obama is re-elected and wants to take our guns as well as our other rights?

We all best protect our kids from those who are most dangerous, not guns!
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