Cerberus to offload stake in gun maker after Sandy Hook massacre

US private equity outfit Cerberus is looking to sell its investment in Freedom Group, the firm that makes the rifle used in the Sandy Hook school massacre last week.

by Michael Northcott
Last Updated: 19 Aug 2013

The debate over gun laws in the US has been dramatically reopened in recent days after disturbed 20-year-old Adam Lanza killed his own mother, then 20 children and six teachers in a Connecticut school last week. It’s not surprising then, that Cerberus Capital Management, a private equity group that owns a stake in major US gun maker Freedom Group, is bowing to pressure to dump its share. 

So what, apart from the global media storm after Sandy Hook, has prompted the firm to consider selling its stake? Well, the California State Teachers’ Retirement System (Calstrs) announced on Monday that it is reviewing its investment with Cerberus following the shooting in Connecticut. It also doesn’t help that Freedom Group manufactured the AR 15 rifle that was used to carry out the massacre, either.

Bosses at Cerberus are evidently not stupid. Calstrs is the second-largest pension fund in the US, and has more than $750m invested with the private equity firm. That’s a serious pot of assets for Cerberus to lose, so it said on Tuesday that it will hire a financial adviser to dump the investment in Freedom Group, and will return whatever cash is raised by the sale to its own investors. 

Cerberus released a statement saying: ‘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.’ The affiliation was obviously looking increasingly politically uncomfortable.

The more pro-gun bosses at Cerberus (and there are bound to be a few) will be quietly disappointed that such a move needs to be made. The gun industry in the US is booming, and Freedom Group posted sales of $677m for the nine months to the September, up from $565m in the same period the previous year. 

Find this article useful?

Get more great articles like this in your inbox every lunchtime

When spying on your staff backfires

As Barclays' recently-scrapped tracking software shows, snooping on your colleagues is never a good idea....

A CEO’s guide to smart decision-making

You spend enough time doing it, but have you ever thought about how you do...

What Tinder can teach you about recruitment

How to make sure top talent swipes right on your business.

An Orwellian nightmare for mice: Pest control in the digital age

Case study: Rentokil’s smart mouse traps use real-time surveillance, transforming the company’s service offer.

Public failure can be the best thing that happens to you

But too often businesses stigmatise it.

Andrew Strauss: Leadership lessons from an international cricket captain

"It's more important to make the decision right than make the right decision."