Cerberus Capital still hasn’t unloaded the maker of the AR-15 but is making tons of money from it

Freedom Group is still on the market, and so is the AR-15.
Freedom Group is still on the market, and so is the AR-15.
Image: Reuters/Adrees Latif
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This item has been corrected.

When you’re holding a hot potato, it seems no harm can come to you as long as you keep throwing it in the air.

For the last nine months Cerberus Capital Management has been trying to sell off the Freedom Group, an agglomeration of firms that sells more firearms and ammunition than any other company in the United States.

Among other weapons, Freedom Group is the leading manufacturer of the most popular, but also the most controversial gun in America: the AR-15, a semi-automatic, military-style rifle used in the 2012 Sandy Hook elementary school massacre that killed 28 and in a rampage this summer that killed six in Santa Monica, California.

The gun was also initially linked to the attack at the Washington Navy Yard, which has so far resulted in 13 deaths, but now law enforcement sources believe the alleged gunman, Aaron Alexis, used a shotgun and two pistols. It’s not clear if any of the guns were manufactured by the Freedom Group.

After Sandy Hook, the famously press-shy Cerberus decided to put the Freedom Group, which it had originally assembled,up for sale—essentially, it said in a statement, to avoid political entanglements it felt were better left to politicians and civic leaders.

The only problem is that Cerberus can’t find anyone to buy the company, and is still making gobs of money from it.

First, Cerberus couldn’t find a bank to help it finance the sale, until Lazard took on the job. Then, it couldn’t find a buyer—to the point where Cerberus founder Stephen Feinberg felt the need to assemble his own bid as a stalking horse to attract more offers. But by early July, that plan was scrapped, with the company reportedly finding eager buyers.

That was two months ago, though, and there’s no new word of a potential sale. Cerberus declined to comment, but a source close to the company said the firm was engaged in an active, ongoing sales process.

Keeping Freedom Group on the books hasn’t been bad for Cerberus’ investors, though. The gun firm reports that second-quarter sales were 51% higher this year than in 2012, when they grew by a still quite healthy 20% over the year before. And since the deaths of 20 young children at Sandy Hook failed to move Congress to pass gun-control legislation, it’s not clear any amount of public outrage will lead to new restrictions on gun sales. That could make the company more attractive to other buyers—or easier for Cerberus to hold on to.

The inability to close a deal says a lot about the conflicted state of the US gun control battle. There’s clearly something wrong with owning this company—otherwise, why would Cerberus try to sell it and why would no buyers emerge? But there’s also little apparent public-relations cost (and no litigation cost—gunmakers in the US aren’t liable when their weapons are misused) to owning the firearms giant, at least as long as Cerberus claims not to want to. And meanwhile, the money just keeps rolling in.

Correction (Sept. 17): An earlier version of this article incorrectly identified the type of weapon used by the alleged shooter at the Washington Navy Yard; while law enforcement sources initially reported the use of an AR-15, they later determined the shooter used two pistols and a shotgun.