Exclusive: Cerberus founder explores bid for Bushmaster gunmaker

Wed Apr 17, 2013 12:43am EDT
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By Olivia Oran, Greg Roumeliotis and Martinne Geller

(Reuters) - Private equity mogul Stephen Feinberg may bid for the Bushmaster rifle maker that his firm Cerberus Capital Management LP put up for sale after one of its guns was used in a Connecticut school shooting, three sources familiar with the situation said.

Feinberg, along with other senior Cerberus partners, is putting together a consortium to make a "stalking horse" offer designed to spur competition for Freedom Group, which makes the Bushmaster rifle, the sources said on Tuesday.

Cerberus is under pressure from the public as well as investors in its funds to sell Freedom Group following the massacre that took place in December in Newtown, Connecticut.

A bid by Feinberg for a company that his own firm owns would be a rare move in the private equity industry. The move raises potential conflict of interest issues, as it could pit the founder's interest against those of the investors in Cerberus funds, known as limited partners. It may also indicate Cerberus may be having problems in selling the company. Banking sources have said that major Wall Street firms have been unwilling to finance a bid for Freedom Group.

Feinberg has approached other wealthy individuals to join him in the bid, the sources said, who declined to be identified because the auction is private. He has not made a bid and may yet decide against it, they said.

Cerberus declined to comment and declined to make Feinberg available for an interview, while representatives of Freedom Group could not be reached for comment.

Freedom Group's AR-15 type Bushmaster rifle was used in the December shootings at Sandy Hook Elementary School in Newtown, which left 20 children and six adults dead.

University of California is among Cerberus investors that have been putting pressure on the private equity firm to quickly sell Freedom Group.   Continued...

A Bushmaster semi-automatic assault rifle, similar to the type used by 20-year-old Adam Lanza during the shooting at Sandy Hook Elementary school on December 14, is turned in during a gun buyback event at the New Haven Police Academy in New Haven, Connecticut, December 22, 2012. REUTERS/ Michelle McLoughlin