Freedom Group could raise $225 million for investor opt-out -sources

NEW YORK Mon Dec 9, 2013 4:43pm EST

NEW YORK Dec 9 (Reuters) - Freedom Group Inc proposed on Monday to raise $225 million in debt and equity to help buy out some of private equity firm Cerberus Capital Management LP's investors, in a deal that values the controversial gun maker at around $1.2 billion.

An undisclosed financial institution has offered Freedom Group a seven-year $200 million loan as well a $25 million equity investment, according to people briefed on a conference call with financiers held on Monday.

Cerberus is also exploring other ways to raise cash in order to buy out fund investors no longer wishing to own Freedom Group, maker of the Bushmaster rifle used in the Newtown, Connecticut school shooting rampage, the people said.

The sources asked not to be identified because the conference call was private. Cerberus declined to comment.

The move comes a year after the New York-based private equity firm said it would sell Freedom Group, a pledge that was made four days after 26 people, most of them children, were killed at the Sandy Hook Elementary School in Newtown.

Freedom Group itself has posted bumper profits so far this year. Nine-month net sales to the end of September were $1.02 billion, up 51 percent year-on-year, while nine-month net income was $94.2 million, up from just $300,000 a year ago, according to the company's latest earnings statement.

Cerberus founder and CEO Stephen Feinberg dropped plans last summer to offer to buy Freedom Group on expectations that another buyer would emerge and would be willing to pay enough to the investors so that they would have to sell below market value, people familiar with matter said in July.

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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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