Private equity group to sell manufacturer of Connecticut shooting weapon
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MADISON — The North Carolina company that manufactures the Bushmaster .223, the weapon used in the Connecticut school shooting, is up for sale.
The private equity group Cerberus Capital Management says it will sell its share in Madison-based firearms-maker Freedom Group Incorporated in response to the tragedy. Cerberus said its role as an investor group was not to “attempt to shape or influence gun control policy,” but selling its declared 95 percent stake in Freedom Group was an action it could take.
UNCG professor of finance and associate dean of the Bryan School of Business and Economics Bill Brown said it was a difficult time to sell any firearms company.
"Prices for everybody are depressed because of this event and I assume people are worried about changes in regulations and so forth," said Brown.
Brown said Cerberus has a strong motivation to sell Freedom Group.
"Their investors tend to be pension funds, university endowments, you know, other types of institutional investors who probably don't want to be associated with this kind of event," he said.
Brown said typically a private equity group would sell off its investment by taking the company public and selling shares on the stock exchange. In this case he was not not sure if Cerberus would follow that strategy.
"I don't know if any of the other sort of firearms manufacturers are interested in buying this company lock, stock and barrel or not. They may be or it may be some other individual investor out there who doesn't have to worry about publicity,” said Brown.
Ultimately the investors Cerberus represented would bear the loss.
"As a result of selling this investment they're probably going to do poorly for this fund and those investors are going to take a hit. But my best guess is because of just the public relations aspect you know they really do want to sell off this investment and get out of the business,” said Brown.
Ironically, Brown said the largest investor of the funds in Freedom Group that are managed by Cerberus is the California State Teachers' Retirement System. He said CalSTRS reported it was unaware it had invested in a firearms manufacturer.