A Surprising Bid for Remington, and an Unsurprising Rejection
Posted July 16, 2018 9:08 p.m. EDT
This spring, I wrote a column suggesting someone should try to buy Remington, one of the country’s oldest and largest firearms makers, and transform the company into a model for advanced and responsible gun manufacturing.
A surprising investor made a bid to do just that. Perhaps not surprisingly, Remington’s management rejected the offer.
The proposal came from the Navajo Nation, one of the largest Native American tribes in the country with more than 350,000 members and land holdings of more than 27,000 square miles in Arizona, New Mexico and Utah.
The Navajo Nation — which controls a $3.3 billion investment trust — sent a letter to Remington in May offering to buy the company for $475 million to $525 million, according to a draft of the letter reviewed by The New York Times. The tribe planned to pay for the purchase in cash.
The Navajo Nation’s plan for Remington was novel: It intended to shift the company away from its consumer business, including curtailing the sale of the AR-15-style weapons frequently used in mass shootings, to focus on police and defense contracts.
The tribe planned to use profits from those businesses to invest in research and development of advanced “smart guns” — those with fingerprint or other technology intended to prevent anyone but the gun’s owner from using the weapon. Smart guns have so far failed to make much headway at the major gun manufacturers, who have faced pressure from groups like the National Rifle Association.
It’s not clear that the tribe’s proposal would have worked, of course. But the Navajo Nation would have had an advantage in sales for police and military contracts. Not only must a certain percentage of government business go to minority-owned companies, but the Native American Incentives Act also confers certain other advantages, according to the American Bar Association.
The only guns the Navajo Nation planned to sell to consumers were long guns like rifles and shotguns used by hunters.
“Navajo is a community of veterans and people of the land,” the tribe’s lawyer, Drew Ryce, said in an email. “We are indifferent to the AR-15 and happy to leave that business behind.”
The tribe saw a purchase of Remington as way to invest in its people, too.
“Navajo has over 70 percent unemployment,” Ryce wrote. “Over the next few years we would shift the assembly (i.e. lesser trained) parts of the business onto the reservation.”
Over the longer term, he said, the tribe would have created the kinds of small machining operations that supply many parts to the company. “We would establish this specific machining of specific parts on-reservation and assemble and ship the products on-reservation,” Ryce said.
Remington, which emerged from bankruptcy this spring, is not a public company. It is largely owned by the investment firm Franklin Templeton, which was a creditor before the bankruptcy. JPMorgan Chase owns a smaller part of the company as a result of previously providing it a loan. Had Remington accepted the offer, both creditors would have been able to quickly exit an investment that has brought with it unwanted attention.
Remington did not answer questions about the bid. In a statement, the company said all offers were submitted to a review committee appointed by its board, which was selected by the stockholders. “All such opportunities are being and have been submitted to the committee for review,” the company said.
A spokesman for Franklin Templeton declined to comment, as did a spokesman for JPMorgan Chase.
The bid was rejected last week after Remington had delayed a formal reply for nearly two months, according to a memo from Christopher Wu, president of Teneo Restructuring, a banker for the Navajo Nation.
“The conversation was cordial,” he said of a call he received from Remington’s general counsel in reply to the bid. “He conveyed an official message from the board thanking us for our interest in pursuing a strategic transaction. He let us know that the company at this time is not prepared to engage with third parties and they required time after their reorganization to assess their business.”
When he asked about the delay, he wrote, he was told again that Remington was not prepared to engage with third parties. There was no mention that the bid price was too low.
Wu said that Remington had offered a potential olive branch to revisit the bid next year. But given the politics of the tribe — primaries for leadership position will be held next month — it’s not clear that another bid would be possible in 2019.
Perhaps it was inevitable that a suitor like the Navajo Nation with such ambitious plans would be rejected — it would clearly upend the company’s management — but it would be a shame if Remington and its investors didn’t reconsider the offer and the enormous opportunity it represents.