“It has been more than 15 months since private equity firm Cerberus Capital Management pledged to sell Freedom Group, maker of the Bushmaster rifle that was used in the Sandy Hook Elementary School massacre,” finance.fortune.cnn.com reports. “The promise came after pressure from the California State Teachers’ Retirement System (CalSTRS), a public schoolteachers pension fund that was invested with the relevant Cerberus fund. By late last year, however, it had become apparent that Cerberus could not find a taker for the company. Too controversial, too big, too integrated.” Yeah, that’s one theory. The other explanation . . .

Feinberg’s farrago of firearms-related companies makes about as much sense as a platypus – and it doesn’t look as if evolution will be as kind to the conglomerate as it’s been to the egg-laying mammal. The Freedom Group has run Marlin into the dirt. Remington’s quality has also slipped into the region known as “sub-par,” they’ve fired the head of marketing and Big Green’s foray into the concealed carry market (the R51) has been universally panned (save for gunblast.com). Advance Armament Corp. haven’t released anything new since KB abandoned ship.

Of course, that’s the gun guy’s take. In the world of high finance it’s all about the numbers. You may recall that Cerberus tried to float the Freedom Group as an IPO. Twice. Equally, if some large financial entity thought The Freedom Group could make them enough money to justify the asking price, they’d have bought it. They don’t, so they don’t. And so . . .

Reuters reported on Dec. 12 that Cerberus had turned to the debt markets for at least $175 million  that it would use to basically buy out limited partners that no longer wanted exposure to Freedom Group. Kind of an in-house direct secondary.

As of this writing, however, Fortune has learned that the ownership of Freedom Group remains exactly the same. Moreover, Cerberus investors have not yet received information from the firm about how they could be bought out (something that CalSTRS, for example, still desires).

A source close to the situation says that the process has moved slowly because it is so complicated to structure the relevant investment vehicles, and because Cerberus needed to be sure it could raise enough money to satisfy all anticipated LP demand (remember: If it offers to buy out CalSTRS at a certain price, it needs to offer the same deal to all other LPs). The firm is now expected to send specific details of its offer to LPs within the next several weeks.

I’m thinking Cerberus is between a rock and a hard place. They don’t want to sink more money into/increase their exposure in The Freedom Group. But they need to bail out squeamish investors to protect Cerberus. So they’ve done . . . nothing.

My prediction: they’ll keep doing nothing as long as they can. Until the firearms market surge subsides and they realize the Freedom Group is worth more in pieces than as a conglomerate. But not as much as they paid for it.

20 Responses to California Teachers Own Bushmaster. Still. Again.

  1. I’m really going to miss a quality Marlin firearm. I deeply regret selling my Marlin 336C .30-30. Thankfully my .45-70 XLR works well.

    Damn FG.

    • I got an older pre safety Marlin .30-30. No comparison between it and the clunky wonders I’ve been seeing lately.

    • I got a 336Y a few months ago. Its really not bad. Laminated wood stock looks great, sights aren’t crooked, no screwdriver stab marks, and the rifle shoots where the sights point. Action is not glass smooth though, feels a little rough cycling the lever. Don’t really have an action point of comparison other than my Mosin Nagant, but it cycles like the bolt is rolling on teflon coated ball bearings. Maybe thats just how lever guns cycle?

  2. And then the teachers will get pissed when their pension return are not as nice as they would like. Maybe they can buy more of the “green energy” revolution

    • I think when the teachers become disappointed all that happens is that that state makes the taxpayers top up the fund.

  3. It really sucks when you’re stuck with an investing that’s outperforming the market. Maybe the poor people of California should stop backing the teacher’s pension fund. Let the teachers feel the pain of bad promises and a fluctuating market.

  4. Gun blast.com never met a firearm he didn’t like. I stopped looking at his reviews sometime ago.

    CalSTRS has some form of fiduciary duty to get the most bang for the buck, least they be sued for poor investment duties. On the other hand they could specifically exclude certain investments, but that might be to the detriment of teachers.

    My guess is they realize the parts are worth more than the whole and are planning on making a killing (when the parts are sold off-without firing a shot). Then they can take the high moral ground.

    They must be in contact with three CA state senators insuring they get the best advice, from all angles of corruption.

  5. Here is my humble suggestion for solving problem of Freedom Group. I’m sure the Cali teachers will love it.

    First, appoint Uncle Leland as CEO. Second, Shrimp Boy Chow gets the Sales/Marketing slot. Third, if they need a boost of capital, a phone call from Steven Seagal to Vlad might be enough to get some foreign capital in the flow.

  6. A source close to the situation says that the process has moved slowly because it is so complicated to structure the relevant investment vehicles…

    In other words, they can’t unload derivatives because everyone has caught on by now, so they’re trying to come up with a new scam that will work for a little while.

  7. How did they turn a bunch of profitable gun companies into not very profitable if at all “gun” companies in the age of Obama?

    Well its gotta start with the fact there is not different barrel lengths for the ACR 4 years after release, no caliber conversions, and they refuse to sell a the Remington handguard to the public.

  8. Re: “They don’t want to sink more money into/increase their exposure in The Freedom Group. But they need to bail out squeamish investors to protect Cerberus. So they’ve done . . . nothing”

    I’m thinking that, Cerberus won’t actually be sinking ANY of their money into TFG. They’ll probably make TFG float the bonds, and they (TFG) be stuck with the debt. BWDIK

  9. If CalSTRS really believe in their own BS they would cash out and take the loss. After all, its members should not care about loosing money if it is moral conviction that needs to be satisfied. The hole in their pensions can be plugged by knowing they did the right thing. Its the right thing to do, for the children.

    • Let’s not be hasty now… we’re all about moral convictions but only if they don’t cost us anything…

  10. You guys should also point out that Remington/Freedom Group are in the shape they are because June 2007, Cerberus Capital Management, acquired Remington Arms for $370 million, including $252 million in assumed debt.
    Remington was millions of dollars in debt, and actually did not report a profit during the years 2003–2005.

  11. Ugghh, at this point perhaps AAC being bought by Silencerco or Sig (where KB works now) would be a saving grace. AAC has headed down a dead end road after making a wrong turn at Remington St, and then KB departing.

  12. Perhaps if Cerberus/Freedom Group took the long view and produced high quality firearms that people wanted, during a time of record high sales, they could turn a handsome profit? Wait. Forget it, I must be wrong.

  13. The bushmaster was not used at sandy hook. It was left in the car with a shot gun. He used hand guns, some thing the media reported early on, but did not mention after the fact. No ar15 was used!!! As reported by the first arriving police.

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