Bloomberg News

Cerberus Founder Feinberg Said to Skip Bid on Gunmaker Freedom

July 04, 2013

Cerberus Capital Management LP founder Steve Feinberg decided not to make a bid for Freedom Group Inc., the gunmaker controlled by the private-equity firm, said a person familiar with the matter.

Several suitors submitted offers, making Feinberg’s bid unnecessary, said the person, who asked not to be identified because the decision is private. Feinberg and partners at Cerberus had approached wealthy individuals about joining in a “stalking horse” bid to spark competition for Freedom Group, the maker of the Bushmaster rifle used in a Connecticut school massacre, people familiar with the matter said in April.

Feinberg’s withdrawal shows Cerberus has run an active auction amid a fierce public debate over firearms after putting Freedom Group up for sale in December. At the start of the process, some investment banks refused to represent potential buyers, people familiar with the matter said in January.

Peter Duda, a spokesman for New York-based Cerberus at public-relations firm Weber Shandwick, declined to comment.

Cerberus made its initial weapons investment in 2006, buying the maker of the Bushmaster, and added acquisitions that included Remington Arms Co. in 2007. The firearms business was named Freedom Group and became the biggest U.S. manufacturer of guns and ammunition.

School Massacre

The buyout firm put Freedom Group on the block four days after the Newtown, Connecticut, slayings of 26 people at Sandy Hook Elementary School on Dec. 14.

Gun-control advocates seized on the shootings to renew a push for a ban on some semi-automatic weapons, which would have covered rifles such as the Bushmaster, and forced a showdown in Congress in which that measure and expanded background checks on firearms were both defeated.

Banks including JPMorgan Chase & Co. (JPM:US), Credit Suisse Group AG and Barclays Plc had declined to advise Cerberus on the sale and also wouldn’t represent a potential buyer, people with knowledge of the matter said in January. The private-equity firm is getting help from Lazard Ltd. on the sale, several of the people said.

It was a rarity on Wall Street for so many banks to eschew an assignment, especially one potentially worth millions of dollars in fees. Freedom Group may fetch as much as $1 billion in a sale, based on the ratios of enterprise value to Ebitda, or earnings before interest, taxes, depreciation and amortization, of competitors such as Smith & Wesson Holding Corp. (SWHC:US) and Sturm Ruger & Co. (RGR:US), data compiled by Bloomberg show.

The debate over firearm legislation has stoked demand for the two publicly traded gunmakers. Smith & Wesson and Sturm Ruger recently posted their highest respective annual earnings since at least 2000.

A recent survey by the National Shooting Sports Foundation, a trade association based in Newtown, reported that retail sales in 2012 exceeded those in 2011. Purchases of assault-style rifles like the Bushmaster model led all others.

To contact the reporters on this story: Cristina Alesci in New York at calesci2@bloomberg.net; David Welch in New York at dwelch12@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


Race, Class, and the Future of Ferguson
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Companies Mentioned

  • JPM
    (JPMorgan Chase & Co)
    • $58.49 USD
    • -0.01
    • -0.02%
  • SWHC
    (Smith & Wesson Holding Corp)
    • $12.98 USD
    • 0.08
    • 0.62%
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