US private equity firm Cerberus Capital Management will sell its stake in gunmaker Freedom Group, following pressure from a major teachers' pension fund client to rethink its involvement in the company that made type of gun used in the Sandy Hook school tragedy.
The California State Teachers' Retirement System (CalSTRS) said on 17 December that it was reviewing its $751.4m investment with Cerberus, after the Newtown, Connecticut school shooting claimed 27 lives, including 20 school children.
Cerberus responded and said "it will retain a financial adviser to sell its interests in Freedom Group, and will then return that capital to investors."
Founded in 1992 by Stephen Feinberg and William Richter, New York-based Cerberus has over $20bn under management and acquired firearms maker Bushmaster in 2006, which is the manufacturer of the AR 15 rifle used in the mass murder that killed 20 children and seven adults at a public elementary school in suburban Connecticut.
Cerberus merged Bushmaster with other gun companies to create Freedom Group, which reported net sales of $677.3m for the nine months ending September 2012. It invests under four primary strategies; distressed securities & assets; control and non-control private equity; commercial mid-market lending and real estate-related investments.
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In a lengthy statement, the Cerberus reiterated that Freedom Group does not sell weapons or ammunition directly to consumers but only to federally licensed firearms dealers and distributors in accordance with applicable laws and regulations.
It also added that it "does 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."
"We cannot comprehend the losses suffered by the families and friends of those killed by the unthinkable crimes committed that day. No words or actions can lessen the enormity of this event or make a dent in the pain that was inflicted on so many. 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 debate essentially focuses on the balance between public safety and the scope of the Constitutional rights under the Second Amendment," it says in the statement.
"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," it added.
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