Update on yesterday's Special Bulletin

Remington/Bushmaster or Bushmaster/Remington?

With yesterday's announcement that Cerebus Capital Management, L.P. had finalized the deal to acquire Remington Arms, a company best known for owning airlines (Air Canada), car rental companies (Alamo and National), a bus manufacturer (Bluebird), and banks and lending institutions in Germany, Israel and Japan became an instant player in the firearms industry.

With their acquisition of Bushmaster, Cerebus already was firmly ensconced in the "black rifle" industry. By acquiring Remington, they have a significant presence in every area of the firearms industry - except handguns.

Some industry figures are already whispering likely candidates to fill what one wag calls "the final space in the Cerebus gun safe".

The deal itself doesn't really take Remington in a new ownership direction. Remington was already owned by two New York private equity firms, Bruckmann, Rosser, Sherrill & Company, and Clayton Dubilier & Rice. Clayton Dubilier bought Remington's assets from DuPont in 1993 for $300 million. The Wilmington, Delaware-based chemical company purchased a 60 percent stake in the gunmaker in 1933 and acquired the remaining shares in 1980.

And, while Remington company spokesman Al Russo has been quoted as saying Remington's management, led by by CEO Thomas "Tommy" Milner, will remain in place, it does give Cerebus Capital some overlapping areas with Bushmaster.

The deal, announced with an estimated value of $370 million, will actually move considerably less real cash. With Cerebus assuming Remington's existing debt, less than $120 million will actually change hands. The remainder will be in existing obligations, transaction fees and other expenses.

Remington says the transaction will strengthen its ability to grow its positions in shotguns, rifles and ammunition in the United States and "provide capital to further develop its market presence internationally."

In the announcement of the sale, Remington's Millner said "This transaction is an acknowledgment of the Remington tradition, its strong brand, and the excellent products built over 191 years through innovation and by our dedicated employees. Further, this new partnership signals our intent to continue the path of enhancing our production capabilities and product offerings, in order to further grow our presence domestically and internationally."

Millner also said the agreement would fuel research and development of products for customers worldwide, "whether hunting waterfowl with a Titanium receiver based shotgun or fighting terrorism as a member of our armed forces with our M24SWS Sniper Weapon System."

Those are, as the Remington releases state, reasons to look to the future with great optimism. But there has to be some concern in the Madison, North Carolina headquarters about the sudden overlapping of efforts between Remington's LE division and Bushmaster. Earlier this week, Bushmaster's E. Scott Blackwell announced the hiring of LE sales veteran Mike Chamberlain to head that company's newly-created post of Director, Law Enforcement Sales.

If there is an old school/new school comparison to be drawn, Remington, is decidedly "old school" in the law enforcement and military space. Bushmaster, with their highly regarded AR-style rifles, and a proprietary new caliber developed in conjunction with Hornady Ammunition (the .450 Bushmaster) is a player in the "black rifle" space with a new round that gives them a round very suitable for hunting - with a nine round magazine capacity.

While there's been no official confirmation of collaborative efforts between the two companies, industry officials and New York financial analysts we've spoken with say it's a virtual certainty there will be a Remington AR in the works. Likewise, it would seem to be logical to presume that Bushmaster may be introducing its own branded line of specialty and match ammunition, although the relationship with Hornady may find itself strained by the new development.

Remington's new ownership gives them rapid access to the cash needed to improve and modernize processes and facilities. Last year, Remington posted a small net profit after three years of significant losses, with overall sales rising to $446 million. As of February, Remington had 2,150 employees.

This is the second significant rolling-up in the firearms industry in the past few months. In December, Smith & Wesson acquired Thompson/Center Arms for $102 million. With Remington/Bushmaster and Smith & Wesson/Thompson/Center, the two companies are now competing head-to-head in rifles, shotguns, and blackpowder markets.

It should make for interesting times. Especially if Cerebus Capital Management, L.P. -with $23.5 billion under management - decides to complete their arsenal with the acquisition of a well-known, but underperforming handgun company.

We'll keep you posted.

Courtesy of The Shooting Wire and The Outdoor Wire.