[Adler]

Remington Arms Readies for 3rd Century of Business by
Entering into Definitive Agreement for Sale

Transaction Positions Company to Drive Manufacturing and Marketing Initiatives for
Growth & Expansion


MADISON, N.C., April 5, 2007 – Remington Arms Company, Inc. the only manufacturer of both firearms and ammunition for Hunting, Law Enforcement/Security, Government & Military applications in the United States, announced that it will be acquired by an affiliate of Cerberus Capital Management, L.P. as part of a definitive agreement between Cerberus and RACI Holding, Inc. for an estimated value of $370 million (which includes the assumption of all of Remington Arms Company, Inc.'s approximate $252 million of funded indebtedness related to the Revolving Credit Facility, 10.5% Senior Subordinated Notes due 2011 and other indebtedness as of such date) before transaction related fees and expenses.

The transaction will strengthen Remington’s ability to grow its leadership position in shotguns, rifles and ammunition in the United States and provides additional capital to further develop its market presence Internationally.

Tommy Millner, CEO of Remington 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.

Remington’s extensive and all encompassing line of Shotshell, Center fire, Rimfire and Handgun Ammunition offerings is based on decades of ballistic innovation providing products under the Remington and UMC brands to customers around the world. For decades Remington has remained the #1 producer of Shotguns and #1 Producer of Rifles for US Domestic sales according to published BATF records.

Said Millner, “This agreement will also fuel the Research & Development of products that offer solutions to the needs of our customers worldwide, and provide further value to the user, whether hunting waterfowl with our new 105CTI Titanium receiver based shotgun or fighting terrorism as a member of our Armed Forces, with our M24SWS Sniper Weapon System (also used by many International Law Enforcement Agencies and Militaries).”

“We look to the future with great optimism in terms of enhanced sales and marketing worldwide and additional new business development, while we continue to focus on building into our products the quality and reliability that has benefited our customers for close to 200 years.” stated Millner.

Credit Suisse Securities (USA) LLC acted as financial advisor to Cerberus with respect to its acquisition of Remington, in addition to providing a financing commitment in support of the acquisition.

The company expects the transaction to close in June 2007.

Quote:
Cerberus Capital Management, L.P. is one of the world's leading private investment firms. Cerberus specializes in providing both financial resources and operational expertise to help transform undervalued companies into industry leaders for long-term success and value creation.

Cerberus is headquartered in New York City with affiliate and/or advisory offices in Atlanta, Chicago, Los Angeles, London, Baarn, Frankfurt, Tokyo, Osaka and Taipei.

Cerberus holds controlling or significant minority interests in companies around the world. In aggregate, these companies currently generate over $60 billion in annual revenues.

Quote:
At Cerberus, we have a long-term investment horizon and focus on value creation. We invest in undervalued companies and their people, and help them to realize their potential.

We partner with our portfolio companies to help them become industry leaders. We believe competition makes the global economy more productive and more efficient, which enables companies to succeed long-term in the globally competitive marketplace.

We encourage our companies to focus on the future through prudent capital investment, R&D, new product marketing, talent development, improved operations and appropriate strategic acquisitions.

 

[MrMcCrackin]

Quote:
At Cerberus, we have a long-term investment horizon and focus on value creation. We invest in undervalued companies and their people, and help them to realize their potential.

We partner with our portfolio companies to help them become industry leaders. We believe competition makes the global economy more productive and more efficient, which enables companies to succeed long-term in the globally competitive marketplace.





sounds like something straight out of a moobie!

 

[DJ 9iron]

And succeeding for over 2 centuries isn't considered "long-term?"

 

[Janq]

They went for cheap (!)...I'm totally shocked.

$370M is not alot of money for a company with as much history, trade/market recognition & branding, and wide variety of product not to mention facilities, tooling, and patents behind it's name.

I'd read early in the week that there is rumor of Colt being up for sale as well.

- Janq

 

[DJ 9iron]

This kind of stuff makes me sick.

 

[Mach5]

They went for cheap (!)...I'm totally shocked.

$370M is not alot of money for a company with as much history, trade/market recognition & branding, and wide variety of product not to mention facilities, tooling, and patents behind it's name.

- Janq

for an estimated value of $370 million (which includes the assumption of all of Remington Arms Company, Inc.'s approximate $252 million of funded indebtedness related to the Revolving Credit Facility, 10.5% Senior Subordinated Notes due 2011 and other indebtedness as of such date) before transaction related fees and expenses.

Holy crap...They went for really cheap!!!!

So if they sold for $370 million and had $252 million in debt...does that mean Remington arms was really only worth about $118 million...Someone help me out with this.


That seems really cheap to me...for a company like this. I would have thought they were worth a lot more.

 

[brucelee]

Dude! 370mil!? Thats IT!?


F'ing MYSPACE sold for 600Million dollars!!! WTF!?



Ahhhhh! That thread makes me sad.

 

[Janq]

Holy crap...They went for really cheap!!!!

So if they sold for $370 million and had $252 million in debt...does that mean Remington arms was really only worth about $118 million...Someone help me out with this.


That seems really cheap to me...for a company like this. I would have thought they were worth a lot more.

The math doesn't work out directly that way,per se.

When a company, or division, sells itself the debt is almost always known and going to be there. Very few companies operate with no debt. As well that debt often is not the same as say personal debt. For example they could be monies owed to private investors, company issued bonds and notes, letters of credit (which are counted on both sides of the value/debt column, and expenses such as employee pensions currrently owed and due in the future. The math is long and wide.
Similar applies on the value side including assesing a dollar value to every single piece of property, physical and intellectual, as well as contract values (e.g. govt., military, state, foreign, and paramilitary/LEO), and then there is the intrinsic value of it's positon within market including it's name and brand(ing) value(s).
There are highly trained people and companies, including my companies client Dun & Bradstreet, who specialize in doing nothing but assesing the value of a company, division, or even a federal agency.

Honestly I would have expected Remington to go for closer to $500M in a sale as normally sale of a company includes aside from the above factors of value & debt inclusion of expected future sales for a period forward which may be a as little as a qurater to as far out as 20 quarters from what I've seen toward other large corporate purchases.
Now I wonder what FNH paid for Winchester.

All things being relative it seems to me, IMHO, that if this press release is correct & actual (e.g. they are not holding back reporting of back end dollars on the deal such as top level manager payouts/buyouts...which technically would be illegal per SEC rules but has been done by others) then this deal was a steal.

I'm seriously stunned they went for so little.
Do they have any product liability lawsuits pending or judgements on appeal?
I'm trying to think of possible explanations for the seemingly low rate.

- Janq

P.S. - I happen to have in front of me relative to my work a dtatiled report of the budgets and monies spent toward procurement for Federal agencies and depts. including various divisions there in of FY'05 (the '06 numbers have not yet been totalized for official public record) and amongst them the budget under DoD for the Air Force Materiel Command (AFMC) covering just administrative management & supporting procurement alone. That total comes to; $318,071,678. Thats not their monies budgeted but what this one specific division actually spent in real dollars.
I bring this up only because again all things being relative $370M is just not alot of money, not for a company and brand on the order of Remington. For example Chrysler is is expected to sell in the $4B range and they have heavy operations debt. As noted freaking MySpace sold for $600M! There has got to be a back story that we unknowledgable people just don't know.

 

[wrigh003]

So if they sold for $370 million and had $252 million in debt...does that mean Remington arms was really only worth about $118 million...Someone help me out with this.

Companies like Cerberus are in the business of buying and selling other companies. In all that press release stuff up there, all it says is that the company as a wholly-owned entity has been bought, and now upper management and/or ownership (many of whom may be about to be or possibly already have been laid off) will be answering to new people. I'm sure Remington is worth all that $370 million (and maybe more), but when large companies leverage themselves out that far, they make attractive targets for these kinds of takeovers for the reasons Janq referred to. They got a quarter-billion dollars in debt buying manufacturing facilities, doing R&D, marketing, and getting/developing other assets. All a buyer has to do is make an offer that makes sense on the owned portion of the business (the $118M part) and offer the current ownership of the company a way out of the debt that's built up. Cerberus is in there to re-org, find ways to make doing business cheaper, and sell it again at some point in the future. They may carve it up a little if they think they can make money doing so, but I seriously doubt that consumers will see much difference. After all- the name and recognition is part of what Cerberus just paid $370M for.

Edit: Damn, Janq is fast.

 

[Bobula]

well myspace is way more dangerous then guns.

 

[Nose Nuggets]

MySpace also makes a SHITLOAD more money then remington does. web based advertising is surpassing radio and tv.

 

[xxG3xx]

well myspace is way more dangerous then guns.

lol

this is horrible 1st winchester now this....

 

[Adler]

But the really sad thing is that have any of you looked at some of the BRAND new Remingtons coming off the line lately? The standard on the fit and finish really took a nose dive. I was at a Scheels ( OVERPRICED MALL STORE) and looked at a new 1100 and a few guns from the Spartan line and oh my god they looked terrible. The 1100 there was much less polished and showed many more tool marks than my 1100 from 1985. The Spartan line, made for them by Baikal(makers of the EAA shottys) also took a dive. They are not even finishing the inside of the work. It had no bluing and the tool marks were awful. Now the Ruskies never had Beretta quality guns but compared to the EAA shottys you can tell Remington had them lower the qulaity on the SXS and O/u. The Spartan auto I saw was scratched and beat up looking out of the box.....and DIRTY!


I think Remington was just in bad shape and needed to get bailed out. As for Colt that doesnt surpise me since they are living off past glory with their 1911, 1873, and AR guns. If they didny have a Govt contract for the M4 until 2010 they would be dead in the water. They have been bought out numerous times since the 50's. They just cant seem to innovate much in the way of new designs since then either. The last decent and competive guns they had were the Trooper 357/cobra and Anaconda. I mean look at their attempts at new autos. The double eagle was a good idea but the grips hold the trigger mechanism together and the frigging thing still had an internal extractor. The Colt 2000 was a joke.

Im just glad someone who loves guns bought Ithaca and is putting them back in the game the way it should be.

 

[Jeremy]

I think this is a good thing for us gunnies. Remy has been close to shutting the doors several times in the last 12 yrs or so and finally found some help. Like the US auto makers Remy is getting hammered by the number of retireing/retired employees and their pensions as well as the R/D $$$ they've wasted in the last few years. As of June a total restructuring of benefits was to start that had people leaving faster than they were before, which was pretty damn fast.

Remy quality has gone down hill ever since Dupont pulled out in the early 90's it's just a fact that unhappy employees don't do the best work. New leadership and $$ might be just the thing to turn Remy back into what it should be.

As far as the price, Remy isn't a big company now. 2500 employees in the manufacturing arena isn't that big of a company. The origional LLion NY plant is aged and could use some work. If the company name wasn't Remington I doubt they would have gotten a deal close to the 1 they did.

 

[speaker]

That selling price seems quite good considering they have 0-to-minimal contracts for military weapons and the majority of their firearms business is civilian based on long guns.