People forget that the Midas touch is intended to be a curse, and Stephen Feinberg’s got it.
The private equity mogul and his partners at Cerberus Capital Management are the primary stockholders in Remington Outdoor, the company that makes the most popular version of the “modern sporting rifle” sold in the US.
That’s one term for the type of semi-automatic “assault rifle” that has been used in numerous mass shootings. Update: In the murder of 49 people at a gay nightclub in Orlando, the gunman used an Italian version made by Sig Sauer. Remington Outdoor’s models are based on another design known as the AR-15, originally developed by the Armalite company in the 1950s.
Both guns, originally designed for the US military, boast high-capacity magazines with 20, 30, or more rounds, and can fire as quickly as the gunman squeezes the trigger. They have become a flashpoint in the debate over gun control because of their use in mass shootings.
After the 2012 Sandy Hook school shootings in Connecticut, Cerberus decided to put Remington Outdoor (formerly known as Freedom Group) up for sale to avoid bad press and political entanglements. But it failed to sell at the reported $1 billion asking price. As for political entanglements, in 2014, the company’s CEO and vice chairman personally financed anti-gun-control campaign ads against a Connecticut governor who pushed for gun control measures.
In 2015, that CEO was forced out, and as Bloomberg reported in December that year, Remington raised $50 million to redeem investments by two California public investment funds who no longer wished to be associated with the firm. Today, the company values its assets at $985 million, and they continue to generate significant cash flow and profits for its owners.
In the first quarter of 2016 (pdf), Remington Outdoor sold $218 million worth of goods, including $25 million worth of “modern sporting rifles.” And, in something of a vicious circle, sales appear to be driven by the response to mass shootings.
“We experienced a strong, but disciplined demand in late 2015 and the first quarter of 2016 after the tragic events in Paris and San Bernardino,” noted the company, which worked to bring an even cheaper version of the weapon to market. ”In response to the demand for opening price point products, we launched the QRC rifle, an entry level price point Bushmaster MSR.”
While a sale seems unlikely at this point—especially given the $880 million the company owes creditors—Bloomberg noted in December that the investors already had recouped the original $180 million investment in the acquisitions behind the company.
It seems Remington Outdoor will continue pumping out the AR-15 variants used in so many mass shootings, and profiting as fear—whether the fear of being defenseless in the face of a gunman, or the fear of politicians eventually mustering the will to outlaw these weapons—helps drive sales through the roof.