Cerberus Capital Management, the Manhattan-based investment firm that owns gunmaker Freedom Group, will put the company up for sale four days after one of its rifles was used in the Connecticut school shootings that left 26 people dead, including 20 first graders.

Cerberus said it will seek to sell Freedom Group Inc. just hours after California Treasurer Bill Lockyer said he'll propose that the state's public pension funds, the two largest in the United States, divest investments in firearm manufacturers that make guns prohibited under state law.

The firm's announcement followed a day in which the White House reiterated President Barack Obama's support for a new ban on assault weapons and lawmakers called for stricter gun-control laws.

"This decision allows us to meet our obligations to the investors whose interests we are entrusted to protect without being drawn into the national debate" on gun control, Cerberus said in a statement issued just after midnight Tuesday in Manhattan.

The firm made its initial firearms investment in 2006, when it bought the maker of the Bushmaster semiautomatic rifle, the weapon authorities say Adam Lanza used on his Dec. 14 rampage at Sandy Hook Elementary School in Newtown, Conn., before killing himself. Cerberus expanded through acquisitions, including the purchase of Remington Arms Co. in 2007, and named the business Freedom Group.


Freedom Group is the nation's biggest manufacturer of guns and ammunition, with nine plants and 3,100 employees. Smith & Wesson Holding Corp. and Sturm Ruger & Co., which make similar military-style weapons, fell for a third day in Wall Street trading as investors shunned firearms makers.

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Cerberus, founded by former Drexel Burnham Lambert trader Stephen Feinberg in 1992, oversees about $20 billion in assets, including private equity and hedge funds. It once owned Chrysler Corp.

"Our role is to make investments on behalf of our clients who are comprised of the pension plans of firemen, teachers, policemen and other municipal workers and unions, endowments, and other institutions and individuals," Cerberus said in the statement. "It is not our role to take positions, or attempt to shape or influence the gun-control policy debate. That is the job of our federal and state legislators."


The California State Teachers' Retirement System, which has $751 million overseen by Cerberus, said Monday it's reviewing the investment, Ricardo Duran, a spokesman for the public pension fund manager, said in an email. Calsters, with $154.8 billion in assets as of Oct. 31, is the second-largest U.S. pension fund. The largest is the California Public Employees' Retirement System, with $241 billion.

While Cerberus filed to take the Freedom Group public in October 2009, it pulled the offering in April 2011 after the gun market slowed and Freedom Group chief executive Theodore Torbeck resigned.

The business has picked up. The company, based in Madison, N.C., reported sales of $677 million this year through Sept. 30, an increase of 20 percent from the same period in 2011, according to a Nov. 15 filing with the U.S. Securities and Exchange Commission.

Adjusted earnings before interest, taxes, depreciation and amortization rose 43 percent to $118 million.

"In many areas, the market is expanding quicker than the industry can increase production," Freedom Group said in the filing. "Our company is experiencing strong demand for modern sporting firearms and handguns." Growth areas include the U.S. government, military and law enforcement, the company said.


About 60 percent of the company's revenue this year derived from the sale of firearms, including sporting shotguns, rifles, handguns and guns that can be modified. The remainder came from ammunition and reloading components, as well as accessories, apparel and other shooting products, according to the filing.

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"We believe the industry is also experiencing trends toward increased recreational and shooting sports and home defense," Freedom Group said. "Further, we believe the adoption of the modern sporting rifle has led to increased long-term growth in the long gun market while attracting a younger generation of shooters."

The Newtown massacre was the deadliest in the United States since 33 people died in a 2007 rampage at Virginia Polytechnic Institute and State University in Blacksburg, Va.

Obama met Monday with Vice President Joe Biden, senior aides and Cabinet members including Attorney General Eric Holder to discuss ways to respond to the tragedy, according to a White House official with knowledge of the session.

Feinstein, Lautenberg "The president's position on the assault weapons ban hasn't changed," White House spokesman Jay Carney told reporters. "He still supports its re-enactment."

Sen. Dianne Feinstein (D-Calif.), said she'll introduce in the new Congress convening in January legislation to reinstate a federal ban on assault weapons that expired in 2004. Sen. Frank Lautenberg (D-N.J.) said he plans to reintroduce his bill banning high- capacity gun magazines, which were used in several shootings, including at Sandy Hook elementary.

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Changes in firearm regulations could "materially adversely" affect Freedom Group by restricting the types of guns it can make or sell, or by adding costs to those processes, the company said in its filing.

Freedom Group had long-term debt of $647 million as of Sept. 30. In January, it bought Para USA Inc., the Pineville, N.C-based handgun maker, for $5 million.

"Regulatory proposals, even if never enacted, may affect firearms or ammunition sales as a result of consumer perceptions," said Freedom Group.