Business moguls who favor stricter gun-control laws — among them Bloomberg LP founder and New York City Mayor Michael Bloomberg, financier George Soros and entertainment honcho David Geffen — are in the unique position of being able to put their money where their mouths are, and with a single bold they move can change the raging gun debate in a way that intransigent politicians cannot.
These well-intentioned billionaires (and others) should buy Freedom Group Inc., the world's largest gun manufacturer, from Cerberus Capital Management, which has put it up for sale, and literally liquidate it.
The company's existing stockpile of guns — it has some $200 million in inventory according to the latest quarterly report — can be melted down and turned into plowshares, or at least tasteful monuments to the horrors of gun violence, and installed in places such as Newtown, Conn.; Aurora, Colo.; Blacksburg, Va.; Tucson, Ariz.; Binghamton, N.Y.; and Fort Hood, Texas.
The idea isn't as implausible as it sounds. Cerberus, the secretive private-equity behemoth run by Steve Feinberg (whose father lives in Newtown), started assembling Freedom Group — the name has that delightful Orwellian spin — in 2006. Cerberus bought Bushmaster Firearms International (the company that manufactured the weapon used to murder 27 people in Newtown, including 20 first-graders) for $76 million, and then Remington Arms Co. for an additional $370 million, including the assumption of $252 million in debt. Since then, Freedom Group has quietly acquired a dozen or so companies, including three in 2012 alone for about $28 million.
“The passion of hunters,” reads the Freedom Group's 2010 prospectus from an aborted initial public offering. “The precision of target shooters. The unmatched dedication of those tasked with our protection. We are proudly associated with all.”
Freedom Group's sales for the first nine months of 2012 and its adjusted earnings before interest, taxes, depreciation and amortization were $677 million and $118 million, respectively. The company's total long-term debt as of September was $652 million. In 2010, and again this year, Cerberus, which owns 95 percent of Freedom Group, took out two dividends totaling $248 million along with an additional $5.3 million in management fees. It is likely that between the dividends and its management fees, Cerberus has already taken out its initial equity investment and then some.