December 18th, 2012

Cerberus Will Sell Off Freedom Group Companies

Freedom Group CerberusCerberus Capital Management, LP (Cerberus), announced today that it would sell its stake in Freedom Group, Inc. (Freedom Group), a holding company that owns numerous firearms-industry businesses. The Freedom Group Family of Companies includes Remington, Bushmaster, Marlin, H&R, DPMS, Barnes Bullets, Eotac, and Dakota Arms. A Bushmaster AR15-type rifle was one of the weapons found at the scene of the Newtown, Connecticut shootings. Adam Lanza, the 20-year-old shooter, also carried Glock and Sig Sauer pistols.

Freedom Group Family of companies

In deciding to sell the Freedom Group, Cerberus was influenced by its large institutional investors. The California State Teachers’ Retirement System, which has over $700 million invested in Cerberus, stated that it was re-examining its Cerberus investment in light of recent events. Translation: After Newtown, this big pension fund was very uncomfortable with the fact that Cerberus was so heavily involved in the gun business (through its ownership of the Freedom Group and specifically Bushmaster).

Here is the text of the Press Release issued by Cerberus on December 18, 2012:

We were shocked and deeply saddened by the events that took place at the Sandy Hook Elementary School in Newtown, CT on December 14, 2012. We cannot comprehend the losses suffered by the families and friends of those killed by the unthinkable crimes committed that day. No words or actions can lessen the enormity of this event or make a dent in the pain that was inflicted on so many.

In 2006 affiliates of Cerberus Capital Management, L.P. made a financial investment in Freedom Group. Freedom Group does not sell weapons or ammunition directly to consumers, through gun shows or otherwise. Sales are made only to federally licensed firearms dealers and distributors in accordance with applicable laws and regulations. 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.

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. The debate essentially focuses on the balance between public safety and the scope of the Constitutional rights under the Second Amendment. 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.

There are, however, actions that we as a firm can take. Accordingly, we have determined to immediately engage in a formal process to sell our investment in Freedom Group. We will retain a financial advisor to design and execute a process to sell our interests in Freedom Group, and we will then return that capital to our investors. We believe that this decision allows us to meet our obligations to the investors whose interests we are entrusted to protect without being drawn into the national debate that is more properly pursued by those with the formal charter and public responsibility to do so.

Our thoughts and prayers are with the families and communities impacted by this tragic and devastating event.

Cerberus Capital Management, L.P.

About Cerberus Capital Management: A private equity firm established in 1992, Cerberus Capital Management, L.P. has more than US $20 billion under management invested in four primary strategies: distressed securities & assets; control and non-control private equity; commercial mid-market lending and real estate-related investments.

Read Related Chicago Tribune Article about Freedom Group Divestiture.

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October 17th, 2011

NRA Debunks Claims that George Soros Controls Freedom Group

The NRA Institute for Legislative Action (ILA) has issued a statement regarding the internet rumors that George Soros in some way controls Cerberus Capital Management, or the Freedom Group of companies. As we have stated in the Daily Bulletin, Soros has no connection to the Freedom Group or Cerberus Capital Management (a holding company that owns the Freedom Group). Claims that Soros is involved in Cerberus or the Freedom Group are 100% false. Here is the NRA ILA statement first issued on October 14, 2011:

From the NRA ILA:
Recently, an old rumor regarding Cerberus–the private equity firm that owns Freedom group, a holding company that in turn owns a number of firearms manufacturers, including Remington, Marlin, Bushmaster, and DPMS–was in some way tied to George Soros.

This rumor is completely false and baseless.

NRA has had contact with officials from Cerberus and Freedom Group for some time. The owners and investors involved are strong supporters of the Second Amendment and are avid hunters and shooters. In reality, at no time has George Soros ever been a part of the ownership group of Freedom Group or Cerberus, and as a privately-traded corporation, there is no possibility that he will be in the future.

This unsubstantiated rumor has caused a great deal of unnecessary concern for gun owners. NRA-ILA urges our members to take great care before repeating baseless rumors[.]

On July 12, 2012 the NRA-ILA posted a follow-up:

An old rumor has once again resurfaced alleging that Cerberus–the private equity firm that owns Freedom group, a holding company that in turn owns a number of firearms manufacturers, including Remington, Marlin, Bushmaster, and DPMS–is in some way tied to George Soros.

This rumor is completely false and baseless.

Following is a statement from Freedom Group, Inc., addressing the rumor:

Despite rumors to the contrary, Cerberus Capital Management, L.P., the firm which owns Freedom Group. Inc. (FGI), the holding company for such firearms manufacturers as Remington, Marlin, Bushmaster and DPMS, is in NO WAY affiliated with anti-gun activist George Soros.

George Soros has never been a part of Freedom Group or Cerberus. Further, as Cerberus is a privately owned corporation, run by sportsmen, shooters and firearms enthusiasts, we can say with great sincerity and certainty that George Soros will never be a part of the Freedom Group family of companies.

“If anyone should know whether George Soros is affiliated with either Freedom Group or Cerberus, it’s me,” said George Kollitides, Executive Chairman and Chief Executive Officer of FGI. “I spent the last eleven years of my career at Cerberus and just recently stepped down to become executive chairman and chief executive officer of FGI. I did this in order to devote 100 percent of my time, effort and passion to a company I spent years building. I can emphatically proclaim, without the slightest of doubt, that George Soros has never, does not and never will own or be affiliated with Cerberus or Freedom Group.”

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April 23rd, 2010

Remington Releases 1911 R1 Pistol

Remington 1911 r1With the Cerberus-owned Freedom Group family of companies preparing for an IPO later this year, industry experts wondered: “Will Cerberus purchase a handgun manufacturer, or launch a line of Remington handguns?” With the announcement of the new Remington 1911 R1 pistol, Cerberus has showed its hand. The new 1911 R1 is the first pistol Remington has produced in decades, and the first 1911-design in 91 years.

Remington’s 1911 R1 is featured in the current issue of Shooting Times (left). A blued-steel retro design, the Remington 1911 R1 is faithful to the 1911 A1 with some modern upgrades. Like the original 1911, Remington’s R1 has a flat mainspring housing, internal extractor, short trigger and double diamond grips. Modern enhancements include a flared ejection port, beveled magazine well, loaded chamber indicator, tall single-dot front and two-dot rear sights, and a black-oxided stainless barrel. The 1911 R1 also has a Series 80-style firing pin block safety.

Remington 1911 r1Classic Lines with Some Modern Features
From a subjective standpoint, this Editor likes the looks of Remington’s 1911 R1 and I favor some of its design features. I personally can shoot 1911s better with the short trigger, and I prefer the clean look of a slide without forward serrations. However, I question the decision, based on styling, to use an internal extractor, and the tall blocky sights look somewhat out of place on a retro-styled 1911. However, the big sights will unquestionably help the gun’s shootability.

Remington’s 1911 R1 will be officially launched at the NRA Annual Meeting in NC in May. The gun, which is made in Remington’s Ilion, NY facility, should be available in June, 2010, and dealers are already taking advance orders. The Remington 1911 R1 will be shipped in a custom carry case with two 7-round magazines and a barrel bushing wrench (see photo below). Suggested retail price is $699.00.

Remington 1911 r1

Do We Need Yet Another 1911?
It’s easy to be cynical about Remington’s entry into the 21st-century handgun market. Rather than give us something new and really remarkable, Remington merely recycled the tried and trued 1911, a design that is already produced by dozens of companies. Do we really need yet another 1911? One clever gun writer joked: “‘1911′ is supposed to be the model name, not the number of companies building versions of it.” Does Remington bring anything to the marketplace that one can’t buy elsewhere? Well, 1911 fans like the pricing of Remington’s 1911, predicting it will sell very well at the $700.00 mark. And Remington does have a history of producing 1911 handguns for the U.S. Military — Remington-UMC built 21,677 1911s for the U.S. Ordnance Dept. in 1918.

But still, one wonders how much market share Remington will grab from Kimber, Springfield Armory, Smith & Wesson, Les Baer, STI, Wilson Combat, USFA and other proven 1911-makers. Is Remington too late to the party with its retro-styled 1911 R1? Would it have been better for Remington to launch an all-new pistol design that creates a whole new market segment, as did Glock and Keltec? If Remington wants to become a major player in the pistol market, wouldn’t it have been better to engineer a more modern pistol that could compete for lucrative LEO and military pistol markets? Perhaps the answer to these questions is that Remington simply took the cheap and easy route — producing a pistol that required minimal engineering and testing. As ToddG writes on the Pistol-training.com Blog: “Building a 1911 is just a lazy way to enter the handgun market. There is little design and testing needed compared to making something new from scratch. Pick a design, build some prototypes, do a little testing to make sure the CNC machines are set right, and start pumping out guns.”

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April 17th, 2010

Freedom Group Files for Public Offering This Year

Want to own a piece of Remington? And throw in Bushmaster, Marlin, DPMS, H&R and EOTAC for good measure? Well you may have your chance later this year. The Freedom Group, a holding company owned by Cerberus Capital Management, is planning to “go public”. Last fall, the Freedom Group filed a preliminary S-1 prospectus with the SEC. This launched the process of regulatory approvals needed for a Freedom Group public offering. Three weeks ago, the Freedom Group filed an amended S-1 in preparation for an IPO in the second half of 2010.

We’ve all been watching the Freedom Group gobble up one firearms-maker after another over the past few years, building the colossus of the gun industry. (See Acquisition Timeline.) Now the Freedom Group claims to be “the largest manufacturer of commercial firearms and ammunition” in the world. The Freedom Group conglomerate includes more than a dozen leading brands: Advanced Armament, Barnes Bullets, Bushmaster Firearms, Dakota Arms (including Miller Arms and Nesika), DPMS/Panther Arms, EOTAC, INTC, Marlin (including H&R, New England Firearms and L.C. Smith), and Remington Arms. With its series of acquisitions (most recently Advanced Armament and Barnes), the Freedom Group has become a dominant player in the Shooting Sports and Security Industries. In its SEC Filings, the Freedom group declared $54.5 million in net income on $848.7 million in net sales.

When will the Freedom Group launch its IPO and how much will shares cost? That information has not yet been revealed, but documents filed so far definitely point to a public offering sometime this year. Will buying shares in the Freedom Group prove a good investment? Well if you had bought gun company stocks immediately after the November 2008 election you could have tripled your money. However, some experts say Cerberus’ decision to take the Freedom Group public indicates that the “blush is off the rose” and the gun industry may be facing lean times ahead, with reduced profit potential and slower growth. For cynics, the IPO announcement confirms that Cerberus plans to “take the money and run” — disposing of the Freedom Group before its profitability declines.

CLICK HERE to download Freedom Group S-1 SEC Filing (3rd Amend.)

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January 5th, 2010

Freedom Group (Cerberus) Acquires Barnes Bullets

Cerberus Capital Managment, through its Freedom Group holding company, has acquired yet another well-known gun industry company: Barnes Bullets. On December 31, 2009, Freedom Group, Inc. entered into a purchase agreement to acquire certain assets of Barnes Bullets.

In recent years, Cerberus/Freedom Group has acquired Remington, Bushmaster, Marlin, H&R, DMPS and other smaller firearms-related companies. By acquiring Barnes, the Freedom Group gains entry into the ammunition component business at a time when brass, bullets, and powder remain in high demand. As the Freedom Group continues to build a vertically integrated firearms-related mega-corp, one wonders if Cerberus will look to acquire a powder-maker next. Freedom Group already sells Remington-brand factory-loaded ammunition.

Barnes Bullets, located in Mona, Utah, is the industry-leading supplier of copper bullets, including copper-tin composite core bullets. Barnes is a major player in the “lead-free” bullet market. This has become important as lead-core bullets have been banned in many hunting areas, and lead-free bullets are required in many indoor shooting facilities. Barnes Bullets will continue day-to-day operations at Utah facility under the guidance of company founder, Randy Brooks.

Ted Torbeck, CEO of the Freedom Group, Inc. stated: “With the acquisition of Barnes, the Freedom Group continues to demonstrate our commitment to the ammunition business. Barnes offers a premium line of high performance bullets for the hunting and shooting communities; and for law enforcement, military and commercial consumers. We are excited about their R&D capabilities and the breadth of the products they bring to our portfolio.”

Cerberus Freedom Group

Freedom Group is now one of the world’s largest producers of guns and ammo. Freedom Group brands include Remington, Bushmaster, DPMS/Panther Arms, Marlin, H&R, NEF, LC Smith, Parker, EOTAC, AAC, Dakota and INTC. The company distributes its products throughout the U.S. and in over 80 foreign countries. Learn more at www.freedom-group.com.

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October 20th, 2009

Cerberus Plans IPO for Freedom Group Companies (Remington, Bushmaster, Marlin, DPMS, H&R)

If you had purchased Ruger (RGR) or Smith & Wesson (SWHC) stock after the November election, you would have seen your investment grow almost three-fold. Ruger stock now trades at over $13.00 after hitting $4.52 last fall. If Remington, Bushmaster, Marlin and other Freedom Group companies “went public”, could they ride the coat-tails of Ruger and S&W, and succeed collectively as a publicly traded stock? Cerberus, a private holding company that controls the Freedom Group, apparently thinks so.

Cerberus Freedom Group IPO

Cerberus Plans IPO for Remington and Freedom Group
A surge in gun sales has pushed the stock prices of major firearms manufacturers upwards. Will that trend continue? We can’t say. However, the money men at Cerberus Capital Management, which owns Remington, Bushmaster, Marlin, and other Freedom Group companies, have decided that the time is ripe to “go public” and start selling stock. According to a 10/19 report in the Wall Street Journal Blog, Cerberus plans an initial public offering (IPO) for its Freedom Group companies. The Freedom Group is comprised of Advanced Armament Corp., Bushmaster, Dakota Arms, DPMS, Eotac, H&R, L.C. Smith, NEF, Parker Gun, Remington Arms Company. Advanced Armament Corp. (AAC) is the latest addition to the Freedom Group collection, having been acquired just this month and placed under the Remington Military Products Division.

In its report on the pending Freedom Group IPO, the Wall Street Journal Blog cited AccurateShooter.com. When Cerberus acquired riflemaker DPMS in 2007, we wrote: “One positive aspect to Cerberus’ involvement in the gun industry is that the huge political clout Cerberus commands as the ‘rescuer’ of Chrysler Corp. should undermine efforts to ban AR-platform rifles. Cerberus is big enough to make waves in Washington. Money talks in politics and Cerberus has lots of it.”

Is the timing right for a gun-company IPO? The stock-market continues to move upward, and gun and ammunition sales remain very strong. On the other hand, the panic buying of black rifles has tapered off and AR-platform gun prices are now dropping back to “pre-panic” levels. Morever, at the end of each calendar year there are usually major stock sell-offs. That could drive down prices of Ruger and Smith & Wesson, which could dampen enthusiasm for a Freedom Group IPO. On the other hand Remington is an historic brand with a strong customer base, and Remington/Bushmaster are poised to take an increasing share of lucrative military contracts. With its new ACR (Adaptive Combat Rifle), Remington could well win the contract for the AR15’s replacement. And, even if the US military sticks with Stoner’s 50-year-old AR design, Bushmaster can fill that need, though it has strong competition from Colt and FN Herstal.

A cynical observer might say that Cerberus is simply looking to grab easy profits by “flipping” arms companies it acquired at fire-sale prices. Given the huge run-up in Ruger and S&W stock prices over the past 12 months, Cerberus may figure that investors will be hungry for Freedom Group shares. Right now may be the best time to take the Freedom Group public while gunmakers are still considered a “hot property” on Wall Street. In six months that could change.

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June 8th, 2009

Remington Acquires Dakota Arms (and Nesika Bay)

Remington Acquires Dakota ArmsRemington Arms Company, Inc. through its fully owned subsidiary DA Acquisitions LLC, has entered into a purchase agreement to acquire certain assets of Dakota Arms, LLC including the Dakota, Nesika Bay Precision, Miller Arms, and Dan Walter brands. The transaction closed on June 5, 2009.

This is the latest major acquisition by Remington Arms, which acquired Bushmaster Firearms, Marlin Firearms, and DPMS in 2007. Remington Arms is owned by Cerberus Capital Management, a private holding company. The acquisition of Dakota Arms is another example of the increasing consolidation of the American gun industry. Dakota Arms had suffered from over-ambitious growth plans and its revenues failed to meet investors’ expectations as Dakota never really developed a strong customer-base for its premium hunting rifles. Dakota tried to become the “Lexus/Mercedes” of the rifle market, but the plan didn’t work. Dakota’s rifles were much more expensive than Remington or Browning products, yet lacked the accuracy and craftsmanship of the high-grade, true custom rifles. “Factory rifles at custom rifle prices” was not a good business model.

Established in 1982 and headquartered in Sturgis, South Dakota, Dakota Arms manufacturers custom and semi-custom rifles for the sporting markets. The Dakota brands include Nesika, Miller Arms and Dan Walter. Nesika Bay Precision actions (at one time) were highly respected for their engineering and build quality; Miller Arms is known for the reliability and performance of its single-shot actions and custom rifles. Dakota Arms is based in the Black Hills of South Dakota and currently employs 35 people.

“I am pleased to announce that Dakota Arms is joining Remington and the Freedom Group of companies,” stated Ted Torbeck, CEO of Remington Arms Company, Inc. and Freedom Group Inc. “Dakota Arms is an icon within the industry and its fine products exemplify quality, craftsmanship and attention to detail. Dakota is the perfect compliment to our industry-leading family of brands. We look forward to continue to develop and expand the Dakota brand and thank all its employees for their continued dedication and success of Dakota Arms.”

Dakota Arms model 10

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