Smith and Wesson

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Finally Confirmed – S&W Buys Suppressor Maker Gemtech (Updated)

July 5, 2017 by 1 Comment

In what has to be considered the worst kept secret on the Interwebs, it was finally confirmed today that Smith & Wesson division of American Outdoor Brands Corp. is buying suppressor maker Gemtech (Gemini Technologies). The Firearm Blog announced it as breaking news on Sunday, July 2nd, and many people posted this to Facebook including myself.

Given that AOBC is a public company, SEC Regulation FD requires “companies to distribute material information in a manner reasonably designed to get that information out to the general public broadly and non-exclusively.” A purchase of this magnitude would certainly have been “material”. I kept looking for a news release on AOBC’s investor relations website as well as for a 8-K filing on the SEC’s website regarding this purchase. 8-K filings usually are simultaneous with new releases though a company has up to four business days to make the filing. I could not find anything official on the purchase of Gemtech.

While I assumed that there was indeed a transaction that was going to take place, not having official confirmation told me one of two things. First, that the transaction wasn’t a done deal yet and maybe there was a snag in the negotiations. Second, it could have meant – and I think this is what happened here – that someone, somewhere jumped the gun on the announcement and violated a non-disclosure agreement.

I think the timing is right for both companies involved. S&W competitors Ruger and SIG both now produce their own suppressor lines. So, too, does Remington with their AAC division. The purchase of Gemtech now allows S&W into the game at a significant level without having to start from scratch. It may also signify a vote of confidence on the part of AOBC and S&W that the Hearing Protection Act will pass as either a stand alone bill or as part of the SHARE Act.

According to Gemtech’s website, they have been in the suppressor business since 1976. While I don’t know how the ownership of Gemtech is structured, I’m guessing that what we are seeing here is a situation similar to that of Crimson Trace. The founder(s) have reached a point where they want to relax a bit and this gives them the opportunity to cash out while still maintaining a presence. Thus, the purchase of Gemtech by S&W becomes a win-win situation for all involved.

The official release is below and notes that the current CEO of Gemtech, Ron Martinez, will stay on as General Manager.

SPRINGFIELD, Mass., July 5, 2017 /PRNewswire/ — American Outdoor Brands Corporation (NASDAQ Global Select: AOBC), a leading manufacturer of firearms and a provider of quality accessory products for the shooting, hunting, and rugged outdoor enthusiast, today announced that its firearms business, Smith & Wesson Corp., has agreed to acquire substantially all of the assets of Gemini Technologies, Incorporated (“Gemtech”), a provider of high quality suppressors and accessories for the consumer, law enforcement, and military markets.

James Debney, President and CEO of American Outdoor Brands, said, “Gemtech is widely recognized for producing some of the finest rifle and pistol suppressors in the market. Gemtech’s strong product development capabilities, combined with our experience in brand management and our manufacturing expertise, will help us to efficiently develop both firearms and suppressors, minimizing our time to market for both product categories. We view this acquisition as opportunistic, allowing us to enter the suppressor category, which resonates strongly with our core firearm consumer, at a time when the market is particularly soft. These elements combine to make Gemtech an excellent fit with our long term strategy.”

The company intends to complete the acquisition of Gemtech utilizing cash on hand and expects the transaction to close this summer. Ron Martinez, President of Gemtech, will continue in his leadership role as General Manager, heading up the company’s strong team located in Eagle, Idaho.

UPDATE: On Monday I had written Liz Sharp, VP for Investor Relations at AOBC, inquiring why there was no release on the purchase of Gemtech and asked if the info had leaked prior to the official release. I got a response back last night after I had written this post. It seems that since AOBC didn’t buy Gemtech but just their assets it was not considered “material”.

Hello, John, and thank you for the inquiry. Yes, Smith & Wesson will purchase the assets of Gemtech in a transaction that we plan to close this summer. Since the transaction is an asset purchase and not deemed to be material, we announced the transaction internally to our employees prior to the holiday, and externally via a press release this morning. … We believe this is a great fit with our strategy. Please let me know if I can help further, and thanks again for the inquiry.

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S&W Wants To Change It Corporate Name

November 8, 2016 by

Smith & Wesson Holding Company filed a Sec. 14A Proxy Statement with the Securities and Exchange Commission today. It was to issue a notice of a special stockholders meeting on December 13th. This meeting is to have the stockholders approve a corporate name change from Smith & Wesson Holding Company to American Outdoor Brands Corporation.

WTF?

You can see the proposal that has been approved by the Board of Directors below. I fully realize that they have bought companies like Crimson Trace and Battenfield Technologies in recent years. While they will be keeping the Smith & Wesson name for their firearms subsidiary, this smacks too much of the Freedom Group aka Remington Outdoor Company.

As a shareholder of SWHC stock, my intention is to vote no on this proposal. This is a personal decision and has nothing to do with my day job. You might have a different opinion on this and, if so, I’d love to hear it in the comments.

PROPOSAL ONE
APPROVAL OF THE SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION TO CHANGE OUR CORPORATE NAME FROM SMITH & WESSON HOLDING CORPORATION TO AMERICAN OUTDOOR BRANDS CORPORATION
Our Board of Directors has approved the Second Amended and Restated Articles of Incorporation to change our corporate name from Smith & Wesson Holding Corporation to American Outdoor Brands Corporation. We now seek stockholder approval of the Second Amended and Restated Articles of Incorporation to accomplish the name change. We believe that the proposed name change will better reflect our increasingly diverse business and stated vision to become the leading provider of quality products for the shooting, hunting, and rugged outdoor enthusiast. As such, the proposed name change will better convey to existing and potential investors the nature of our expanding business around a number of individual but synergistic companies. We also believe that the proposed name change will better differentiate our identity, as a holding company, from the identity of our firearm subsidiary, both of which currently carry the name “Smith & Wesson.”
Currently, we are a holding company that owns, directly and indirectly, a family of consumer product companies addressing the shooting, hunting, and rugged outdoor markets, including Smith & Wesson Corp., Battenfeld Technologies, Inc., Crimson Trace Corporation, Deep River Plastics, LLC, and BTI Tools, LLC. Those subsidiary companies operate in four divisions and manage multiple brands, including the following:
BOG–POD ® – Tripods, Bipods, Monopods, and Accessories
Caldwell ® – Shooting Supplies
Crimson Trace ® – Electro Optics
Deep River Plastics™ – Precision Plastic Injection Molding
Frankford Arsenal ® – Reloading Tools
Golden Rod ® – Moisture Control
Hooyman ® – Outdoor Saws and Accessories
Lockdown ® – Vault and Safety Accessories
M&P ® – Firearms and Outdoor Accessories such as Bags, Knives, Specialty Tools, and Flashlights
Non–Typical™ – Wildlife Solutions
Old Timer ® – Knives and Specialty Tools
Performance Center ® – High Performance, Specialty, and Custom Firearms
Schrade ® – Knives and Specialty Tools
Smith & Wesson ® – Firearms and Outdoor Accessories such as Bags, Knives, Specialty Tools, and Flashlights
Thompson/Center™ – Hunting Firearms and Accessories
Tipton ® – Firearm Cleaning Supplies
Uncle Henry ® – Knives and Specialty Tools
Wheeler ® Engineering – Gunsmithing Supplies
Each of our subsidiary company’s brands has tremendous value and meaning to its loyal customer base, and each subsidiary company will retain its current name under this proposal so that it can continue to benefit from the brand equity that has been built over the years. Our existing firearms business subsidiary will continue to operate as, and be named, Smith & Wesson Corp. This subsidiary owns the 164 year old Smith & Wesson brand – a brand that is one of our strongest assets and a brand that must be preserved, supported, and protected so that we may continue to benefit from its iconic nature. Thus, changing our name is not intended to diminish the importance of the Smith & Wesson brand in our portfolio. Rather, our new name will represent a broader and more inclusive platform from which to expand into the shooting, hunting, and rugged outdoor markets.
We believe that changing our corporate name to American Outdoor Brands Corporation will better reflect our strategic focus on the shooting, hunting, and rugged outdoor markets. Changing our name will not result in any change in the name of any subsidiary company or any branded product marketed by any of those subsidiary companies, and, if the proposal is approved, our corporate structure would remain the same.
4    
     LOGO
 Special Proxy Statement

Table of Contents
  PROPOSAL ONE  
If approved by the stockholders, the proposed Second Amended and Restated Articles of Incorporation will become effective upon the filing of the Second Amended and Restated Articles of Incorporation with the Secretary of State of the state of Nevada, which we anticipate will occur on or about January 1, 2017. At the same time, we also anticipate we will adopt the symbol “AOBC” for our stock exchange listing, as it will be more closely aligned with our new name.
A copy of the proposed Second Amended and Restated Articles of Incorporation that would be filed with the Secretary of State of the state of Nevada to effect the name change is attached hereto as Appendix A and is hereby incorporated by reference into this proxy statement; provided, however, that such Second Amended and Restated Articles of Incorporation are subject to change or modification to include any technical changes as may be required by the office of the Secretary of State of the state of Nevada.
On the date of this proxy statement, we issued a press release regarding our proposed corporate name change. A copy of the press release is attached hereto as Appendix B and is hereby incorporated by reference into this proxy statement.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE PROPOSAL TO APPROVE THE SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION TO CHANGE OUR CORPORATE NAME FROM SMITH & WESSON HOLDING CORPORATION TO AMERICAN OUTDOOR BRANDS CORPORATION.
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Smith & Wesson Does Their Own Bit Of Shopping

November 26, 2014 by 3 Comments

Smith and Wesson Holdings Corporation (SWHC), the parent company of Smith & Wesson, got started early on their Black Friday shopping. They are reported to have purchased Battenfield Technologies for approximately $130 million. Battenfield Technologies is a Columbia, Missouri-based maker of firearms accessories.

Smith & Wesson Chief Executive James Debney said the acquisition “fits perfectly within our core firearm business. It also allows us to move more strongly into the hunting vertical as well as establish a strong platform for growth in our existing firearm accessories business, which has been a small but highly profitable part of our company.”

Smith & Wesson expects the deal, set to close in mid-to-late December, to boost the company’s margins, earnings and cash generation in its business year ending in April 2016. The move is also expected to contribute incremental revenue of more than $55 million for the 2016 business year.

Battenfeld Chief Executive Jim Gianladis will serve as the president of Battenfeld Technologies and will report directly to Mr. Debney.

Battenfeld was acquired by private-equity firm Clearview Capital in June 2012.

Battenfield’s brands include Caldwell, Wheeler Engineering, Tipton Cleaning Supplies, Frankford Arsenal, Bog-Pod, Lockdown, Golden Rod Moisture Control, and Non-Typical Wildlife Solutions.

Battenfield was owned until 2012 by Larry Porterfield of MidwayUSA and his family. They sold their interest in the company to Clearview Capital and to members of the Battenfield management team.

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A Partnership That Makes Sense

November 24, 2014 by 1 Comment

Smith & Wesson and General Dynamics announced today that they would be partnering on a submission for the Army’s Modular Handgun System. This is the Army’s plan to upgrade their sidearm’s from the Beretta M9 which is getting a little long in the tooth.

When you think about it, this partnership makes a lot of sense. Smith & Wesson knows handguns and has done very well with their polymer striker-fired M&P platform. General Dynamics knows defense contracting and they are one of the largest defense contractors making everything from nuclear submarines to Gatling guns.

It will be interesting to see what they come up with. Other handgun manufacturers would be smart to follow their lead in approaching this as a joint project.

Below is the joint press release from Smith & Wesson and General Dynamics:

ST. PETERSBURG, Fla. – General Dynamics Ordnance and Tactical Systems and Smith &Wesson Holding Corp. are partnering to pursue the U.S. Army’s Modular Handgun System (MHS) solicitation to replace the M9 standard Army sidearm.

The strategic partnership’s Modular Handgun System will be based on the Smith &Wesson M&P Polymer Pistol platform. Designed with a reinforced polymer chassis, superior ergonomics, ambidextrous controls, and proven safety features, the M&P is used by U.S. and law enforcement agencies worldwide. The M&P’s features make it well suited for the MHS requirement by providing sidearms that exceed the military’s expectations for a future modular handgun in terms of performance, reliability and durability. The M&P pistol has been in production since 2005.

“This partnership combines General Dynamics’ proven legacy in manufacturing military armaments with Smith &Wesson’s extensive experience in designing and manufacturing firearms for commercial applications,” said Tim McAuliffe, vice president and general manager of medium caliber ammunition and weapons for General Dynamics Ordnance and Tactical Systems. “General Dynamics’ extensive background in winning and managing military contracts brings proven leadership to the venture and by joining together, we will use our combined knowledge and expertise to bring this unique capability to the U.S. military to better equip the warfighter.”

Smith &Wesson President and CEO, James Debney, said, “The strategic partnership between our two companies provides us with a tremendous opportunity to support our military with a state-of-the-art sidearm, namely our M&P pistol. General Dynamics Ordnance and Tactical Systems brings us a wealth of experience and resource in federal government contracting and that capability is an ideal match with our knowledge in handgun manufacturing technology. We look forward to working together to pursue this exciting opportunity to support our military.”

The Army’s draft MHS solicitation identifies design and performance requirements for a new modular handgun system that can be easily adjusted to fit all hand sizes and is optimized for improved gun, ammunition and magazine performance. The Army’s stated plan is to commence the competition in January 2015, with delivery of the first new handgun systems in 2017.

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Stepping Up To The Plate In California

January 31, 2014 by 12 Comments

As I reported earlier this month, both Ruger and Smith & Wesson have taken a stand against the California Department of Justice Handgun Roster by letting numerous popular models of their handguns drop off the list. In other words, they refuse to make a California-only model that includes a microstamped firing pin.

Now Mike Fifer and James Debney, the CEOs of Ruger and Smith & Wesson respectively, have filed Declarations in support of the plaintiffs challenging the Handgun Roster in the long-running case of Pena v. Lindley. This is a case being brought by the CalGuns Foundation and the Second Amendment Foundation in US District Court for the Eastern District of California.

The Declaration of Ruger CEO Mike Fifer can be found here. In it he says that the microstamping requirement is unworkable and that no firearms manufacturer has been able to implement it.

The Declaration of S&W CEO James Debney says that the technology is unworkable and that “the state law requires the technology to perform at a level it cannot.” Debney goes on to point out that many of their handguns also do not have mag disconnects and loaded chamber indicators.

These Declarations join the amicus curie brief of Glock, Inc. in arguing against the Handgun Roster and in favor of the plaintiffs’ position.

The Second Amendment Foundation welcomed the support from all three firearms manufacturers in a release put out yesterday shown below.

SAF THANKS GUN COMPANIES FOR
SUPPORT IN CA MICROSTAMPING CASE

BELLEVUE, WA – The Second Amendment Foundation is expressing heartfelt gratitude today to three major firearms companies – Ruger, Smith & Wesson and Glock – for their supporting documents in the on-going case of Pena v. Lindley, a lawsuit challenging the California handgun roster requirements that include microstamping and magazine disconnects.

Earlier this week, Ruger CEO Michael O. Fifer and Smith & Wesson President and CEO James Debney submitted declarations to the court, explaining their respective companies’ positions on the California microstamping requirement. Late last year, attorneys representing Glock, Inc. filed an amicus curiae brief supporting the SAF case.

“SAF will be eternally grateful for the timely support from all three companies, which we believe strongly reinforces our case,” said SAF founder and Executive Vice President Alan M. Gottlieb. “The statements from Messrs. Debney and Fifer confirm what we have argued all along, that California’s requirements place an undue burden on both consumers and manufacturers.”

In his statement, Fifer bluntly observed, “There is no workable microstamping technology today, and Ruger believes that California’s microstamping regulations make compliance impossible.”

Debney concurs in his statement, noting, “Smith & Wesson does not believe it is possible currently to comply with California’s microstamping regulations. Quite simply, the state law requires the technology to perform at a level that it cannot.”

In its earlier brief, submitted by attorneys Erik S. Jaffe of Washington, D.C. and John C. Eastman of Orange, Calif., Glock maintained that neither its pistols nor any other handgun in common use can comply with California’s microstamping mandate.

“You cannot regulate handguns out of existence or out of the marketplace by mandating technology that doesn’t work,” Gottlieb observed. “Now three major gun companies have weighed in and we’re confident their opinions will carry a lot of weight.”

The impact of the microstamping requirement on handguns available for sale in California can be seen in this infographic from the CalGuns Foundation.  It is not a pretty picture and not a Constitutional one in my opinion.

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S&W Joins Ruger In Leaving California Market

January 23, 2014 by 4 Comments

Smith & Wesson has officially announced today that they are letting their M&P series of semi-automatic pistols drop off the California Department of Justice Handgun Roster. For the time being, the M&P Shield and the SDVE pistols will remain on the roster as the company plans no changes to these pistols and they were added to the list prior to the beginning of 2014.

What I would like to see and, I think most would agree, is for S&W along with Ruger, Glock, and any other supplier of pistols to the law enforcement market in California take the Ronnie Barrett approach to this. That is, if it can’t be sold to individuals in California then it won’t be sold to law enforcement either. Barrett went further and stopped providing spare parts and repairs as well. 

The official statement from Smith & Wesson courtesy of the Outdoor Wire is below:

SPRINGFIELD, Mass. (January 23, 2014) — Smith & Wesson Corp. announced today that although it continually seeks ways to refine and improve its firearms so that consumers have access to the best possible products, the State of California is making that impossible when it comes to California residents.

Under California’s “Unsafe Handgun Act,” any new semi-automatic pistol introduced into that state must comply with microstamping laws. In addition, California asserts that anything other than a cosmetic change to a handgun already on the California Roster of Handguns Certified for Sale, including performance enhancements and other improvements, requires it to be removed from the roster and retested. For semi-automatic pistols, this means it must comply with the microstamping requirements, as well.

Smith & Wesson does not and will not include microstamping in its firearms. A number of studies have indicated that microstamping is unreliable, serves no safety purpose, is cost prohibitive and, most importantly, is not proven to aid in preventing or solving crimes. The microstamping mandate and the company’s unwillingness to adopt this so-called technology will result in a diminishing number of Smith & Wesson semi-automatic pistols available for purchase by California residents.

This is not a problem unique to Smith & Wesson. The microstamping legislation and California’s position regarding performance enhancements and other improvements creates the same challenge for all firearm manufacturers, since presumably all of them refine and improve their products over time.

Smith & Wesson currently produces a California-compliant version of its M&P® Shield and SDVE™ pistols. Both of these new products were launched last week at SHOT Show® in Las Vegas and are expected to begin shipping within 90 days. They are expected to more than offset the impact of those M&P pistol models that will not remain on the Roster. Both the M&P Shield and the SDVE pistols are expected to remain on the California Roster of Handguns Certified for Sale as long as no changes are made to those models and the company does not plan to make changes to them for this reason. All other Smith & Wesson handguns are at risk of eventually falling off the roster over time. The company expects that any current production revolvers that fall off will be re-tested and returned to the roster, since microstamping does not apply to revolvers. Without some change in position by California, however, any semi-automatic pistols (other than the California-compliant models referenced above) that are removed from the roster will not be returned and law-abiding citizens will not be permitted to buy them from a licensed dealer in California.

James Debney, Smith & Wesson President & CEO, said, “As our products fall off the roster due to California’s interpretation of the Unsafe Handgun Act, we will continue to work with the NRA and the NSSF to oppose this poorly conceived law which mandates the unproven and unreliable concept of microstamping and makes it impossible for Californians to have access to the best products with the latest innovations. At the same time, we will do our best to support our customers in California with state-compliant products, enabling them access to at least a portion of the firearms to which we believe all citizens are entitled. In these challenging times, we hope you will support Smith & Wesson, and all gun manufacturers, in our fight to make the Unsafe Handgun Act about safety. We also encourage you to support the NSSF’s lawsuit and other efforts to stop microstamping, before it impacts your Constitutional rights.”

Unless California changes its position, all M&P pistols other than the M&P Shield, will fall off the roster by August, 2014, due to performance enhancements and other improvements we have made to those firearms. This includes the M&P9c, which has fallen off already and several other M&P models that will fall off by the end of this month. Other models already have fallen off and will continue to fall off for the same reason. Visit http://oag.ca.gov/sites/oag.ca.gov/files/pdfs/firearms/removed.pdf each week for a list published by the California Department of Justice of the handguns no longer on the roster.

California firearms dealers should check the official California Roster of Handguns Certified for Sale frequently, to determine which handguns are certified for sale in California. This list can be found at http://certguns.doj.ca.gov/.

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How To Inspect Your M&P Shield

August 23, 2013 by

Smith & Wesson has issued a recall on their popular M&P Shield pistols made before August 19, 2013. They have identified a condition whereby the trigger bar pin could damage the lower trigger in such a way as to cause the drop safety feature not to work. If a pistol with this condition were to be dropped, it could fire unintentionally. While S&W thinks this condition may only be present in some more recently manufactured Shields, they are being cautious.

To help determine if your M&P Shield is one of the pistols with this defect, Smith & Wesson has released a YouTube video showing exactly how to determine if the trigger bar bin is not functioning correctly.

Kudos to S& W for not only issuing the recall but posting this video showing owners on how to inspect their pistol for this potential defect. If a picture is worth a 1,000 words, then a video ups that by a factor of 10.

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Quote Of The Day

June 14, 2013 by



Smith and Wesson (SWHC) released their earnings report for the fiscal year ending April 30th yesterday. With the growth in gun sales over the past three years, you would expect that they did well and they did. Net sales figures for the 4th Quarter were up approximately 38% over the same quarter in the prior year. Fiscal year net sales for 2013 were up 43% over FY2012.

So who should they thank for their sales growth? John Nolte at Breitbart has this to say:

It is hard to judge who Smith & Wesson should thank most: Gun-grabber President Obama, murdered-child-exploiter Piers Morgan, or insufferable-sell-out Joe Scarborough. Or maybe the gun maker should just send a big fat bouquet to all of the media:

JournOlist HQ

Hollowed-Out Volcano Lane

Water Carrier, DC 66666

Actually, Smith & Wesson should be and likely is grateful to a nation of Americans who instinctually understand and appreciate their God-give right to not be bossed around, intimidated, or swayed by a bunch of hypocritical, bossie-pants, fascists who hide behind armed guards in secured high-rises.

 In what is generally a down day for Wall Street, S&W stock is up approximately 5% at midday.

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Smith & Wesson Tops The Globe 100

May 23, 2013 by

The Boston Globe publishes an annual list which ranks the best performing public companies in Massachusetts. The winner this year probably surprised them but certainly not those of us in the gun culture. It was the 161-year old firearms manufacturer Smith & Wesson which is located in Springfield.

In an article that is mostly unbiased for the left-leaning Globe, they explain why S&W topped the list.

With its sights trained on firearms once more, Smith & Wesson increased profits 14 times over in 2012, netting $66 million on sales of $538.6 million and rocketing to the first position on this year’s Globe 100 list.

‘We went back to what we do best, which is handguns. We divested the security business very successfully and since that point have not looked back.’ – James Debney, CEO, Smith & Wesson

But the company’s renaissance is not merely a case of addition by subtraction. In recent years, Smith & Wesson has ventured beyond its core revolver business, introducing popular polymer handguns and modern sporting rifles.

The latter — often referred to as assault rifles — represent Smith & Wesson’s fastest-growing product line. Sales increased by 85 percent last year, and a line that did not exist in 2010 delivered more than a fifth of the company’s total revenue.

“It’s become an important piece of our business,” Debney said, acknowledging some concern about legislative efforts to ban the controversial weapons. “But at the end of the day, we come back to our core competency, and where we’re strategically focused, in terms of product, is the [military and police] pistol.”

At the moment, civilian sales of polymer handguns outnumber law enforcement sales, 20 to 1. Smith & Wesson only launched a polymer handgun line in 2006, but the company now views it as the main driver of future growth.

Currently, Smith & Wesson is the third ranked firearms manufacturer by number of firearms produced in the US behind Ruger and Remington. Their current order backlog is approximately $668 million which is greater than the previous year’s sales.

Smith & Wesson was given a $ 6 million tax incentive to expand their plant back in 2010. That tax incentive required them to hire an additional 225 over the next seven years. They have already met this requirement as they have hired 350 new workers in the past two years to meet the demand for new firearms. Their payroll is now $80 million annually and their total workforce in Massachusetts now numbers 1,500.

There are a number of comments on S&W topping the Globe 100. Most are as one might expect from what JayG calls the Volksrepublik. They include stuff like “Glorifying a company that manufactures guns?” and “Surely there must be a more worthy #1 pick than an assault weapons manufacturer.” It is actually rather amusing to watch the wailing and gnashing of teeth over this. I know for certain that the 350 people who have gotten good paying steady work are not among them.

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More On The Sale Of The Freedom Group

April 24, 2013 by 2 Comments

Last week was somewhat consumed with the vote on Manchin-Toomey and the Boston Marathon bombings. The Wall Street Journal ran a couple of stories about the sale of the Freedom Group by Cerberus. You may remember that Cerberus put the Freedom Group up for sale in December after the Newtown shootings in response to pressure from some major pension funds who were investors.

In the first story dated April 16th, the Journal reports that a bid group is being formed by Stephen Feinberg and other partners in Cerberus. The rationale behind this is to provide a floor in the auction price for Freedom Group in order to prevent lowball offers.

Mr. Feinberg, Cerberus’s co-founder and chief executive, and other partners, using their own money, are looking to team up with other investors to place a bid for Freedom Group, the people said. The Cerberus partners would have a minority financial position in the group, according to the people. The partners are reaching out to other wealthy individuals and families to join the bid, the people said.

Cerberus would then form a special committee of investors of the private-equity firm who, along with the Cerberus board, would evaluate any bids. The bidding partners wouldn’t be part of that review process. The Cerberus group would withdraw from the bidding if a suitor tops its offer by 10% or more, the people said. The group wouldn’t receive a breakup fee.

That story also reports that 16 potential bidders have looked at the Freedom Group’s financials. The auction is being run by investment bank Lazard Ltd.

A follow-up story in the Wall Street Journal revealed some of the potential bidders for the Freedom Group who have examined the company’s financial information.

Smith & Wesson Holding Corp. and Sturm, Ruger & Co. have asked for detailed information on Freedom Group, the people said. Alliant Techsystems Inc., an aerospace and defense company that also makes ammunition and firearms accessories, has also expressed interest, they said.

While both Ruger and S&W are firearms manufacturers, this would mark the first move into firearms manufacturing for Alliant Techsystems. ATK currently makes Federal and Estate ammunition along with Alliant powder and a whole host of components such as Speer and CCI. While not mentioned, I think it would be conceivable that FN-Herstal which manufactures both Winchester and Browning sporting arms might be interested as well.

UPDATE: Frank W. James has a very perceptive comment over at SayUncle regarding the interest shown by Ruger, ATK, and S&W in the Freedom Group. In essence, they are using the opportunity to examine Freedom Group’s books not to buy the company but to compare their costs to those of Freedom Group. In other words, they are getting competitive intelligence for free.