Initial Public Offering for a Gun Maker

Rock and Glock · October 20th, 2009, 09:44 PM

Quote:

By PETER LATTMAN, Wall Street Journal

Built through a string of Cerberus acqusitions, Freedom Group is one of the largest gun makers. Here, a student in Kansas tests a Bushmaster rifle in 2008; Cerberus bought Bushmaster Firearms in April 2006.

The private-equity firm is in advanced preparations for an initial public offering of Freedom Group Inc., said people familiar with the situation, hoping to sell shares in a little-known company it has built into a dominant player in the red-hot rifle-and-ammunition business.

Over a three-year span, Cerberus -- while under the spotlight for ill-fated acquisitions of auto maker Chrysler LLC and lender GMAC LLC -- has acquired at least seven U.S. gun-and-ammunition makers.

Those companies have been consolidated into a Madison, N.C.-based company called Freedom Group Inc. It is on track to generate about $900 million in sales this year, according to a person familiar with the results. That makes Freedom one of the world's largest manufacturers of firearms and ammunition.

A spokesman for Cerberus declined to comment.

While U.S. retail sales remain sluggish, rifles and ammunition are flying off store shelves. A number of factors are driving increased demand, including the political concerns of gun owners. Since the election of President Barack Obama, demand for firearms has spiked amid concerns the administration will increase restrictions on firearms ownership and levy additional taxes.

Also, the U.S. military, fighting wars in Iraq and Afghanistan, has increased its weapons purchases, and government contracts present a large opportunity for Freedom Group.

Freedom Group has been a major beneficiary of the boom. Background checks conducted by the Federal Bureau of Investigation, a key measure of firearms sales, increased by 20% for the first nine months of 2009 from the same period the year before, according to the National Shooting Sports Foundation.

Cerberus will try to take Freedom Group public amid a flurry of private-equity-backed companies hoping to exploit an improved IPO market. New York-based Cerberus itself brought Talecris Biotherapeutics Holdings Corp., a producer of blood-plasma medicines, to market earlier this month, a deal that has generated a net gain of $1.8 billion.

But over the past two weeks, several buyout-backed IPOs have sputtered, raising concerns over whether demand will support the flood of supply.

Stephen Feinberg

A successful offering of Freedom Group would arrive at a welcome time for Cerberus. The firm, which manages about $24 billion in assets, has taken losses on its investments in Chrysler and GMAC. Those losses in part caused investors to withdraw $4.77 billion from the firm's hedge funds.

The origins of Freedom Group date to April 2006, with Cerberus's acquisition of Bushmaster Firearms. A year later, it paid $118 million for Remington Arms Co., the country's largest and oldest maker of rifles. Since then, Cerberus and its affiliates have acquired Marlin Firearms, a maker of lever-action rifles; Cobb Manufacturing; Dakota Arms LLC and DPMS Panther Arms, a large manufacturer of AR-15 rifles. Its acquisition binge shows no signs of slowing. Earlier this month, Remington purchased Advanced Armament Corp., a Norcross, Ga., maker of pistol silencers.

Cerberus's thesis was to consolidate a fragmented industry it saw as undermanaged. Earlier this year it named Ted Torbeck, a 20-year veteran of General Electric Co., as Freedom's chief executive. Befitting the low profile maintained by Cerberus and its founder, Stephen Feinberg, the company lacks a Web site. While each of its brands has a Web site, none mentions Freedom Group. Freedom is expected to enhance its corporate identity in the coming months, according to people familiar with the company.

Helping oversee the investment for Cerberus is George Kollitides, who like his boss Mr. Feinberg is an avid shooter and hunter. Mr. Kollitides, who has run unsuccessfully for a National Rifle Association board seat, is a member of the upscale hunting club Mashomack Preserve Club in Pine Plains, N.Y. Mr. Feinberg, an ardent deer hunter, favors a Remington Model 700 and owns the rifle in a variety of calibers.

This is exciting. It'll be fun to see how it performs as a public company.

varob · October 20th, 2009, 09:55 PM

What's the price?

Rock and Glock · October 20th, 2009, 10:01 PM

Quote:

Originally Posted by varob

What's the price?

Not set yet. I'll keep my eyes out for the offering circular.

Nova · October 20th, 2009, 10:02 PM

Smith and Wesson Holding Company reported some great earnings not too long ago and they shot up in price. I haven't checked back with them recently.

Guns are hot right now and these companies should be racking up the sales in an otherwise lousy economy. Look for surprise pops in earnings reports! Stay diversified too!

Nova · October 20th, 2009, 10:04 PM

Quote:

Originally Posted by Nova

Smith and Wesson Holding Company reported some great earnings not too long ago and they shot up in price. I haven't checked back with them recently.

Guns are hot right now and these companies should be racking up the sales in an otherwise lousy economy. Look for surprise pops in earnings reports! Stay diversified too!

Well, they've been tracking lower and lower...em, I wouldn't invest in SWHC!

Jmac00 · October 21st, 2009, 12:00 AM

Quote:

Originally Posted by Nova

Well, they've been tracking lower and lower...em, I wouldn't invest in SWHC!

Ya I was surprised to see both Ruger and S&W have retreated, S&W has lost 2 points in recent weeks.

Anyone know what the new stock symbol is going to be?

MinistrMalic · October 21st, 2009, 10:21 AM

[soapbox]

I must say, the thing that caught my eye was the HORRIBLE picture. Okay, I am all for a young lady holding an AR, and of course I noticed that it has no mag in it. However, it looks like it's been abused to death. She has no eye protection or ear protection on, and though it does not look ready to fire she has her finger on the trigger.

Translation: someone let this kid go nuts with a .223 without properly instructing and monitoring her in safety requirements. Shame on them!

[/soapbox]

jwhite75 · October 21st, 2009, 10:49 AM

Cerberus is the same company that bought Chrysler too is it not???

Sorry just read the article again.

October 20th, 2009, 09:55 PM	#2
varob Distinguished Member Join Date: Jun 2009 Location: Virginia Posts: 1,273	What's the price? __________________ Don't believe what you hear and only half of what you see! -Tony Soprano

October 20th, 2009, 10:02 PM	#4
Nova Member Join Date: Oct 2008 Location: Virginia Posts: 190	Smith and Wesson Holding Company reported some great earnings not too long ago and they shot up in price. I haven't checked back with them recently. Guns are hot right now and these companies should be racking up the sales in an otherwise lousy economy. Look for surprise pops in earnings reports! Stay diversified too! __________________ Springfield XD45 4" 13+1

October 21st, 2009, 10:21 AM	#7
MinistrMalic Member Join Date: Dec 2008 Location: Phoenix, AZ Posts: 481	[soapbox] I must say, the thing that caught my eye was the HORRIBLE picture. Okay, I am all for a young lady holding an AR, and of course I noticed that it has no mag in it. However, it looks like it's been abused to death. She has no eye protection or ear protection on, and though it does not look ready to fire she has her finger on the trigger. Translation: someone let this kid go nuts with a .223 without properly instructing and monitoring her in safety requirements. Shame on them! [/soapbox] __________________ "...whoever has no sword is to sell his coat and buy one." (Luke 22:36) Here is my blog if you're interested :)

October 21st, 2009, 10:49 AM	#8
jwhite75 VIP Member Join Date: Mar 2006 Location: West Virginia Posts: 2,304	Cerberus is the same company that bought Chrysler too is it not??? Sorry just read the article again. __________________ Friends don't let friends be MALL NINJAS. "May God have mercy on my enemies...because I won't." -Gen. George S. Patton.

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