Gun retailers, makers, investors feel the heat after Newtown shooting

Pressure mounts on companies and politicians as the gun debate heats up after the murders at Sandy Hook Elementary last week.

Dick's Sporting Goods has pulled all guns from its store closest to the site of the Friday massacre in Newtown, Conn., and suspended the sale of certain kinds of semi-automatic rifles from its chains nationwide.

Wal-Mart Stores took down an informational website about semi-automatic Bushmaster rifles, but Cabela's continued to sell Bushmaster AR-15-type rifles on its website.

Shares of gunmakers Smith & Wesson Holdings Corp and Sturm Ruger plunged for a second day following the Newtown school massacre and after private equity firm Cerberus Capital Management said it would sell gunmaker Freedom Group.

Following pressure from a major investor, Cerberus said it is selling the gunmaker, whose Bushmaster AR-15-type rifle was used in the Connecticut school massacre last week.

The California State Teachers' Retirement System (CalSTRS) said on Monday it was reviewing its investment with Cerberus in the wake of Friday's shooting.

CalSTRS, the second-largest pension fund in the United States, had invested $751.4 million with Cerberus by the end of March 2012, according to its website.

Cerberus said on Tuesday it would hire a financial adviser to sell its interests in Freedom Group and return the proceeds to investors.

The private equity firm expressed shock and grief at the killings in Newtown but added that Freedom Group was not responsible.

"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," it said.

Cerberus bought firearms maker Bushmaster in 2006 and later merged it with other gun companies to create Freedom Group, which reported net sales of $677 million for the nine months ended September, up from $565 million a year earlier.

Founded in 1992 by Stephen Feinberg and William Richter, New York-based Cerberus has more than $20 billion under management and shares its name with a mythical three-headed dog which in Greek mythology guards the entrance to the underworld.

Related: A guide to gun control terminology

Besides Cerberus, a few other private equity firms also have stakes in firearms companies. Sciens Capital Management, for example, jointly owns small arms maker Colt Defense.

In an opinion piece published on Monday in Slate magazine, former New York Governor Eliot Spitzer said pressure should be stepped up on the owners of gun companies, like Cerberus, to change the way they operate.

"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," Spitzer wrote.

Popular New York Times columnist Andrew Ross Sorkin, in an opinion piece that was critical of private equity investments in arms makers, took exception to the fact that Freedom Group and other notable gun manufacturers had not commented on the tragedy.

Both opinion pieces were published before Cerberus's announcement.

GUN CONTROL DEBATE

Cerberus said the Newtown tragedy was a "watershed event" that has raised the national debate on gun control "to an unprecedented level."

However, it added the firm was responsible for only investment decisions it makes on behalf of its clients and does not play the role of "statesmen or policy makers."

"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," it said.

U.S. lawmakers have not approved a major new federal gun law since 1994, and a ban on certain semi-automatic rifles known as assault weapons expired in 2004.

The Newtown massacre has led President Barack Obama and some congressional leaders to reconsider what has been a largely hands-off approach to gun control in recent years.

The percentage of Americans favoring tough gun regulations rose significantly after the killings at the Connecticut school, a Reuters/Ipsos poll showed on Monday.

 

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