Private equity firm Cerberus Capital Management announced today that it plans to sell off its investment in gunmaker Freedom Group, the manufacturer of the rifle that Adam Lanza is said to have used in the Newtown shootings that killed 20 children and seven adults.
“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 firm said in a statement announcing the decision. More from the Cerberus:
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.
Cerberus bought Bushmaster in 2006 and later merged it with other gun companies to create the Freedom Group, one of the nation’s largest firearms conglomerates. According to the New York Times, the gunmaker reported net sales of $677.3 million for the first nine months of this year, a 20 percent jump from the same period the previous year.
Public pressure has been mounting on the private equity firm to get out of the gun business all together in the wake of the shooting. Here was Eliot Spitzer lending his voice to the cause in Slate yesterday:
It is time to determine pension fund by pension fund who has invested in Cerberus and bring pressure on those investors either to get out of Cerberus or have Cerberus change the way it runs the gun industry. If a major union pension fund or university endowment has an investment with Cerberus, it surely doesn’t want to be tarred as a passive owner of the company that sells semi-automatic weapons with no background checks or concern for the use of the weapons. Those investors have enormous leverage over the Cerberus. And all those investors collectively, if they spoke with one voice to the management team at Cerberus, could wield vast power. Ownership has both responsibility and power. It is time for every comptroller and pension fund manager with an investment in Cerberus to use that power.
That same day the California State Teachers’ Retirement System, a rather massive pension fund, said that it would be reviewing its investment in Cerberus over the firm’s stake in the gun company. “At this point, our investment branch is examining the Cerberus investment to determine how best to move forward given the tragic events of last Friday in Newtown, Connecticut,” a spokesman for the public pension fund told Reuters on Monday.
For more on Cerberus and Freedom Group, you can check out this 2011 profile of the gunmaker in the Times.
Complete Coverage: Read the rest of Slate’s coverage of the Sandy Hook school shooting.
This post was updated at 9:40 a.m. with additional information and analysis.