by Dave Workman
Senior Editor
Smith & Wesson, the embattled gun manufacturer that fell out of grace with gunowners over its marketing agreement with the Clinton Administration, has been purchased for a reported $15 million cash by Saf-T-Hammer of Scottsdale, AZ.
Under terms of the agreement, announced by Saf-T-Hammer President Bob Scott, $5 million cash will be paid upon closing of the agreement, with the balance due in May 2002. It was a “pennies on the dollar” deal, as S&W was purchased several years ago by Tomkins, Plc, a London-based conglomerate, for $112 million.
As of the closing, Smith & Wesson’s total assets were approximately $97 million, which includes two manufacturing facilities (the main plant in Springfield, MA, and a smaller facility in Houlton, ME). The main facility is a 660,000 square-foot plant on 160 acres. The other facility is a 36,000 square-foot plant. Also included in the assets are patents, distribution rights, trademarks and inventories. Total liabilities are approximately $53 million, which includes a 10-year note payable to Tomkins for $30 million due in May 2011.
S&W spokesman Ken Jorgensen told Gun Week that the mood around the plant is, “for the most part, positive.” The company, he acknowledged, had already announced some layoffs, with about 50 salaried positions to be eliminated.
The new owner is no stranger to the 147-year-old company. Scott is a former S&W vice president for sales and business development. Scott noted, “We are proud to return this storied company to American ownership. We intend to maximize the value of the name and to fully utilize the manufacturing, marketing, and worldwide distribution assets of the company to create appreciation and value for our shareholders.”
Scott also stated that he plans to increase the company’s revenues through expanded branding activities and “strategic acquisitions.”
For many reasons, the firearms community cast a wary eye on the 1987 purchase of S&W by Tomkins. But what sent the company into a tailspin was the announcement last year by S&W’s then-CEO, Ed Schultz, that an agreement on the company’s handgun marketing had been signed with the Clinton White House. Gunowners considered Schultz had signed “a deal with the devil.” The agreement was decried by gun rights activists and organizations, and what amounted to a boycott of S&W products swept through the shooting community.
Schultz subsequently left S&W to run another company, and Tomkins announced in January that the gun manufacturer was up for sale as part of a restructuring program. Industry insiders hint that Tomkins wanted to divest itself of S&W, primarily because of the potential liabilities related to a swarm of lawsuits filed against the firearms industry by some 30 US cities and counties.
The Schultz-Clinton agreement did not help matters. When he signed the agreement with Clinton’s secretary of Housing and Urban Development, Andrew Cuomo, Schultz was reportedly convinced that it would provide S&W with some relief from the lawsuits. That relief was never realized, and at January’s SHOT Show in New Orleans, the company announced that it was “revising” the original agreement.
However, the gun industry has been successful in having many of those legal actions dismissed. A lawsuit filed by the Second Amendment Foundation against mayors of those cities, and against the US Conference of Mayors, is awaiting a September hearing in a Washington, DC, federal court.
When the sale was announced, Scott stated that, “We plan to incorporate Saf-T-Hammer products into the firearms manufactured by Smith & Wesson.” Whether that means that future S&W handguns will all be equipped with the Saf-T-Hammer technology was not immediately clear. Saf-T-Hammer has three main products: Saf-T-TriggerTM, a mechanical trigger block that is permanently installed in the trigger guard; Maximum Security CableTM, a “shockproof” lock with a steel cable that is virtually cut-proof, and Versa VaultTM, a large capacity handgun vault. For more information, visit the company’s website at: www.saf-t-hammer.com.
“It took a tremendous amount of creativity and diligence from both companies to craft the terms of this transaction,” said Saf-T-Hammer founder and Chairman, Mitchell Saltz.
True enough. Rumors of the impending sale had swirled around the firearms industry for some weeks, with reports indicating that the deal was “on-again, off-again” until the May 14 announcement made it official.
Saltz said the entire $15 million purchase is being funded by a private investor he refused to identify, until that investor is identified when the company files paperwork with the Security and Exchange Commission.
Saltz said Smith & Wesson’s headquarters will remain in Springfield, and maybe 30 to 35 jobs will be eliminated.
The future of the agreement with the government remains unclear.
“We need to sit down with the lawyers from both sides,” Saltz said.