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Continued: Lee Schafer: Minneapolis private equity firm decides that guns aren't worth the risk

  • Article by: LEE SCHAFER , Star Tribune
  • Last update: July 6, 2013 - 10:03 PM

Savage was certainly performing. The Boston Globe reported in April that business is booming across the so-called Gun Valley of western Massachusetts and Connecticut, where Savage is located. The outlook was particularly rosy for Savage.

NEP declined to confirm this, but the Globe reported that its growth was 50 percent in 2011, 40 percent in 2012 and was on pace to increase an additional 40 percent in 2013.

ATK said it paid 5.5 times earnings before interest, taxes, depreciation and amortization for the 12 months through the end of March. If the firearms unit is really growing 40 percent annually, then ATK at 5.5 times cash earnings got enough of a deal on Savage Sports to suggest NEP was one motivated seller.

NEP will only say that it was a “very successful” investment and that during its 16 months of ownership, NEP worked with the company to double profitability.

NEP joins with other private equity groups in selling firearms investments this year, including the Blackstone Group and Cerberus Capital Management. Cerberus is seeking a buyer for Freedom Group after being pressured by limited partners appalled that a Freedom unit made the rifle used in Newtown.

In conversations with other private equity investors in Minneapolis, they all have industries they wouldn’t touch. Tobacco is definitely out, for example, as are payday lending and collections businesses. But there wasn’t a blanket refusal to consider any investment related to the firearms industry.

NEP made the right call, though, if it really doesn’t want to make a nickel from the sale of a firearm that might be used in a mass shooting. It’s not always an assault weapon or handgun used in mayhem.

It’s worth remembering the hot summer day in 1966 when a former Marine named Charles Whitman took a small arsenal with him to the top of the University of Texas tower in Austin and began shooting.

Before it was over, Whitman had killed or fatally wounded more than a dozen people and injured many others. The most lethal weapon he used that day was a Remington model 700, a simple bolt-action rifle.

A deer hunting rifle.

 

lee.schafer@startribune.com 612-673-4302

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  • “Did Newtown change our perspective?  Yes,” said Tim DeVries, managing general partner of Northwest Equity Partners. “It made us incredibly happy that we were as careful in our going-in process, and that we avoided the easily abused products.”

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