The company whose AR-15 type Bushmaster rifle was used in the Newtown school massacre in Connecticut will be immediately put up for sale, its private equity owner Cerberus Capital Management LP said Tuesday in response to investor concerns.
The secretive private equity firm risked the ire of investors, which include some of the largest U.S. public pension funds, after its investment in Freedom Group Inc, owner of Bushmaster Firearms International that makes the rifle, came under public scrutiny.
The pressure on Cerberus to sell the firearms maker comes as it seeks up to $3.5 billion from investors for its latest buyout fund.
Cerberus' board of directors includes former Vice President Dan Quayle and former Treasury Secretary John Snow.
Late Monday, California Treasurer Bill Lockyer asked CalPERS and CalSTRS, the state's public pension funds and the largest in the United States, to account for their investments in gun manufacturers, and proposed that they sell their interest in any company that makes guns that are illegal under California's assault weapons ban.
California's ban includes the Bushmaster rifle.
"The Treasurer's view is that neither fund should be invested in any company that makes guns that are illegal in this state, especially ones that were used to kill 20 innocent children and six innocent adults," Tom Dresslar, a spokesman for Lockyer, said.
CalSTRS, the California State Teachers' Retirement System, said Monday it was reviewing its investment with Cerberus in the wake of Friday's shooting at Sandy Hook Elementary School in Newtown.
"It's an unusual move by Cerberus but it was a terrible event, so they are responding to some of their investors who are teachers' funds. I'm sure they will be selling it at a low price because now would not be a good time to sell the business," said Steven Kaplan, a University of Chicago finance professor.
Cerberus filed for an initial public offering of Freedom Group in October 2009 but withdrew the registration in April 2011, without offering a reason.
In addition to Cerberus, some gun retailers also took steps.
Dick's Sporting Goods pulled all guns from its store closest to the site of the massacre in Newtown, Conn., and suspended the sale of certain kinds of semi-automatic rifles from its chains nationwide.
Wal-Mart Stores Inc. took down an informational website about semi-automatic Bushmaster rifles.
Cabela's Inc continued to advertise AR-15 type Bushmaster rifles on its website, though it said the weapons were not available for sale online or at its Connecticut store location.