In the wake of the shooting deaths of 26 people—including 20 children—in Connecticut last week, private equity giant Cerberus Capital Management has announced that it plans to sell its portfolio company Freedom Group, a leading gun manufacturer.
Several factors reportedly contributed to Cerberus's decision to proceed with a sale of Freedom Group, a Madison, North Carolina–based holding company created in 2007 as the $20 billion private equity firm began snapping up gun industry brands such as Bushmaster and Remington.
The New York Times, which last year examined in detail how Freedom Group grew to corner a significant share of the U.S. weapons market, notes that increased media scrutiny, public pressure, and calls from pension fund clients were among the forces that led New York–based Cerberus to consider a sale. (Another possible consideration: Cerberus founder and CEO Stephen Feinberg's father lives in Newtown, Connecticut—the site of Sandy Hook Elementary School, where the horrific December 14 shooting occurred.)
While public policy issues have commanded the most attention in the immediate aftermath of the shooting—President Barack Obama has called for proposals to reform gun laws in the United States by the end of January and has tapped Vice President Joe Biden to lead the administration gun control push—the lawyers that Cerberus taps to advise on what becomes of Freedom Group will have to contend with a politically charged atmosphere and a potentially shifting regulatory environment when managing any sale of the company. (Post-Newtown legislation could well hinge on a key U.S. Supreme Court ruling, according to sibling publication The National Law Journal.)
Previous deals involving Cerberus and Freedom Group suggest that the leading candidates to advise on the looming sale of the weapons maker are Milbank, Tweed, Hadley & McCloy and Schulte Roth & Zabel, with the latter having particularly long-standing ties to the private equity firm.
Schulte represented Cerberus this past September, for instance, on its $2.5 billion sale of a controlling stake in Tokyo-based Aozora Bank. Schulte also advised a Cerberus affiliate earlier this year on its $950 million buy of AT&T's Yellow Pages directory division, Cerberus's $6.3 billion sale of Chrysler Financial in 2011, and the private equity firm's $830 million purchase of Caritas Christi Health Care in 2010.
Schulte also racked up millions in legal fees advising Cerberus on its efforts to extricate itself from a disastrous investment in Chrysler, which was eventually sold to Italian automaker Fiat three years ago after a government-backed bankruptcy.
Former Schulte partner Mark Neporent serves as chief operating officer, general counsel, and senior managing director of Cerberus. He did not respond to a request for comment on whether Cerberus has chosen an external legal adviser for the sale of the Freedom Group, nor did Cerberus co–general counsel Andrew Kandel and Seth Plattus, or associate general counsel Sheila Peluso.
Marc Weingarten, chair of the business transactions group at Schulte and a longtime legal adviser to Cerberus, did not respond to a request for comment on whether his firm had any role advising Cerberus in connection with any planned Freedom Group deal. A Schulte spokeswoman also did not respond to an inquiry on the matter.
Though Schulte has been one of Cerberus's most active outside legal advisers over the past few years, Milbank landed the role representing the private equity firm on its $370 million acquisition of Remington Arms in 2007.
