The Sale of Freedom Group
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April 24th, 2013 at 8:05 pm
I don’t put much stock into the fact that both Smith&Wesson and Ruger are examining the financials of Freedom Group. S&W did the same thing years ago with Colt and essentially this is the time to learn what their manufacturing costs in comparison to their own.
As for ATK I suspect the same thing is happening vis-a-vis Remington Ammunition. For the cost of a deposit with the sellers they get to learn what their competitors operating costs are and where they should look for their own internal financial improvements…
All The Best,
Frank W. James
April 24th, 2013 at 8:56 pm
Frank brings up very good points. For the cost of the deposit, the companies get superlative competitor intelligence.
April 25th, 2013 at 10:38 am
As long as the final Buyers are Pro-Gun supporters of the 2A, I’d be happy.
My biggest worry is if some Billionaire Anti-Gunner like Bloomberg or Soros buys it and shuts it down.
April 25th, 2013 at 12:33 pm
I wonder if Harry Reid’s bill requiring background checks for buying “explosive powder” includes sparklers and fireworks, where the bombers got the powder from? Hmm background checks for explosive powder includes: Black powder, gun powder, Al powder, cremora and other milk substitutes), flour… Hmm
April 25th, 2013 at 12:33 pm
damn wrong post
April 25th, 2013 at 3:30 pm
There is certainly truth to what Frank W James is pointing out. But at the same time, especially if the price is right, the real value is likely in shelf space which is vital for any chance to grow your business.
No one can buy your product if its not available to purchase.
As with all things retail, a significant part of the game isn’t producing good products and compelling ads/consumer demand, but actually securing retail space.
In the grocery industry, these are called slotting fees. Its why 50 cent was able to sell a vitamin drink company t coke for 1/2 a billion dollars. Coca Cola didn’t care about vitamin drinks or 50 cents, they cared about the slotting fees that the company he invested in had secured.
There is only so much rack/shelf space at gun stores and ad slots in magazines. Go to your local gun dealer, or more tellingly, Wal mart which sells more guns than anyone else. Even at the Wal Mart with the largest displays, I bet they have no more than 30 slots in the gun case. And how many of those are taken up by a Freedom Group brand? Between Remington (Model 700 and 710s, and the 870s), Marlin and H&R, you likely have 8-% of that space taken up. Add in the low end Mossberg shotguns, a couple of 10/22s and perhaps a Bushmaster or DPMS rifle (oh, yeah, more Freemdom Group member), and that’s it. Which means, if your Ruger or Smith & Wesson your potential market is capped from the outset (if your Smith & Wesson, your particularly screwed if you want to sell through Wal Mart).
So yea, maybe they want access to those books. But all the competitive advantage in the world doesn’t amount to shit if you can’t get your product on the shelf. I would assume thats the real value.
April 25th, 2013 at 3:38 pm
There is another potential value in this purchase. If your Smith & Wesson or Ruger, you are desperate to get out of Connecticut. But that costs lots of money. If you buy Freedom Arms, your also buying yourself a number of previously constructed, machined up, factories complete with trained staff. The marginal cost of orchestrating an exit from those states that hate you – Connecticut, New York, Illinois, etc – just plummeted.
And with it, the ability to inflict severe economic pain on the politicians who tried to put you out of business. Magpul will leave Colorado, but its going to take some time. And it won’t be cheap or easy. It would be significantly more prohibitively expensive for any major gun manufacturere to pull up and leave. But if you can buy ready made factories, with a skilled workforce AND tie into the purchase all sorts of state financed enticements, then the cost of the whole deal (underlying value of Freedom Group, potential future sales, slotting fees, manufacturing, etc,) becomes incredibly attractive. And I assume these companies, after the Obama Gun Boom, are flush with cash and looking to place it in super smart investments.
And if Ruger and/or Smith & Wesson actually picked up and left Connecticut, what message would that send to urban Democrats? Those would be hundreds (if not thousands) of real jobs (and union jobs at that) which disappeared from an economically distressed state due entirely to asinine worst interest of foolish politicians. Replace them with non union workers (heck, they may even be able to create a new company altogether and somehow get out of the union pensions) and there would be political hell to pay for Democrats.
April 25th, 2013 at 3:40 pm
Of course, I suspect the Department of Justice sends their top Anti Trust investigators in to stop any sale that might lead to a move and the lose of jobs in a Democrat state/district.
But wouldn’t that be delightful too . . . to have the Obama Administration put in a position of either approving the consolidation of the firearms industry or having to oppose it for its impact on the firearms marketplace (and I suspect that if the purchaser is actually S&W or Ruger that there would be real and legitimate anti trust issues).