Never a dull moment in the gun industry. A little-known Palm Beach (Fla.) technology company has made an unsolicited $1 billion cash offer to buy the largest American firearm and ammunition manufacturer, Freedom Group. The target is currently owned by the private equity firm Cerberus Capital.
Several things seem surprising about this bid, which the would-be buyer, Global Digital Solutions (GDSI), described in a March 11 filing with the Securities and Exchange Commission. For one thing, Global Digital, a publicly traded company, lacks a notable profile in the famously insular gun industry. Its outsider status guarantees that Global Digital will be greeted with skepticism within Freedom Group and by rival manufacturers and gun-rights advocates.
After rolling up several famous firearm brands into Freedom, Cerberus has tried for the past year to unload its gun holdings. Freedom’s brands include Remington, Bushmaster, DPMS/Panther Arms, Marlin, Para USA, and Barnes Bullets. Bushmaster manufactured the semiautomatic military-style rifle used by the killer in the December 2012 Newtown (Conn.) elementary school massacre. Investor outcry following that horrific event put pressure on Cerberus to announce that it would look for a buyer for Freedom Group.
Whether Global Digital will succeed in scooping up Remington, Bushmaster, and their sister brands seems far from certain. In public statements, Global Digital said acquiring Freedom Group was an initial step toward a planned buying spree of other manufacturers of arms and ammunition. “We see enormous opportunity to consolidate this market,” Richard Sullivan, Global Digital’s chief executive and chairman, said in a press release.
Sullivan’s company describes itself as one “positioning itself as a leader in providing cyber arms manufacturing, complementary security and technology solutions, and knowledge-based, cyber-related, culturally attuned social consulting in unsettled areas.” Which “culture” Global Digital is attuned to wasn’t immediately apparent. When I called the company to talk to Sullivan, I was connected to what sounded like a cell phone that eventually cut me off. That was strange and not encouraging.
Global Digital’s 8-K SEC filing said that an initial proposal to acquire Freedom, dated Jan. 27, elicited no response from the Cerberus-owned company. “In order to facilitate discussions,” Global added, it made the renewed March 11 offer. The SEC filing said Freedom’s estimated net sales for 2013 would be in the range of $1.25 billion to $1.275 billion.
The bid for Freedom Group didn’t prompt any immediate public comment from Cerberus, a notoriously tight-lipped New York firm. Meanwhile, the Chamber of Commerce in Huntsville, Ala., which expects to become the new host of a $110 million Remington plant employing 2,000 people, tried to cast doubt on the Global Digital bid. “Remington has been in touch with the state about this, and they have been in touch with us,” Patricia McCarter, a spokeswoman for the chamber, told the news website AL.com. “They have emphatically stated Remington is not in negotiations on this. It has been characterized as a PR play for a company known to be anti-firearms.”
Separately a report on the Outdoor Wire, a reliable gun industry newsletter, said Remington had described the Global Digital offer as “attention seeking in its worst form” and is planning a formal response soon.
One thing Global Digital may be seeking attention for is a new product called GDSI Gatekeeper. Announced in January, Gatekeeper “represents a revolutionary suite of technology-enhanced services that offer personalized, digital small arms safety and security solutions in commercial and military-related markets,” according to Global Digital. That sounds like some kind of computerized mechanism to limit access to a firearm only to an authorized user—more commonly known as “smart gun” technology. A number of companies and entrepreneurs have tried to perfect smart gun approaches since the 1990s, but they’ve encountered technical hurdles, consumer ambivalence, and fierce opposition from the National Rifle Association, which views the technology as a means to impose stricter gun control.
All of this is very curious, to say the least.
UPDATE AT 3:20PM | Christian Lowe at the Grand View Outdoors website obtained an internal memo Remington sent to its employees, dismissing the potential sale of Freedom Group:
“A small, unknown investment entity publicly announced its desire to acquire the Remington Outdoor Company,” says the memo, which was written by company CEO George Kollitides and obtained by Grand View Outdoors. “If this wasn’t disruptive to our employees and customers, we would not acknowledge the news and recognize it for what it is: a publicity stunt from an agenda-driven group with no credible financing options.”