Sturm, Ruger (NYSE:RGR) was recently reported as being in the running to buy the ammunition business of bankrupt gun manufacturer Remington, a move that would have been a dramatic departure for the pure-play firearms maker.
Although there was some sense to becoming vertically integrated in the current environment, as the firearms industry is seeing an unprecedented increase in demand, Ruger has always been a company that stays in its lane and does what it knows best.
As it turns out, what Ruger really wanted from Remington was its Marlin Firearms business, which it agreed to pay $30 million for. That's a much more sensible purchase, and it should help the gunmaker continue to grow sales.
Firearm sales are booming. The FBI just reported background checks of potential gun buyers through its National Instant Criminal Background Check System (NICS) jumped another 25% in September and so far in 2020, such investigations are up over 40% from the year-ago period, rising to almost 28.8 million.
The FBI has already conducted more background checks in the first nine months of 2020 than it did for all of 2019.
The National Shooting Sports Foundation just came out with its own adjusted figures, eliminating duplicate checks on items like concealed carry weapon permit holders to see if they're still eligible to have one. Although that lowers the total number of checks made, it provides a better gauge of consumer demand for firearms. Year to date, NSSF data shows background checks are up almost 70% through September.
These numbers stand against a backdrop of riots and civil unrest across major American cities, as well as calls for defunding the police.
A broad-based recovery
Ruger reported firearms sales jumped 20% in the second quarter due to "oversized demand," while Smith & Wesson Brands said last month fiscal first-quarter net revenue more than doubled year over year, with firearms sales up 140%.
Ruger and Smith & Wesson don't sell guns directly to the public, rather only to federally licensed firearms dealers and major retailers, so their results may lag the record growth being seen in more recent periods.
Throughout the summer, adjusted FBI checks were doubling, and though the rates have eased up as reported incidents of violence have scaled back, demand for firearms is still growing at a heady pace.
Remington has faced financial hurdles that have made it difficult to benefit from the current industry growth, including a debt load it inherited from its private-equity owners and lawsuits brought against it by families in the wake of the 2012 Sandy Hook Elementary School shooting.
And then there were none
Now Remington's guns and ammunition businesses has been sold off to various bidders:
- Ruger got the Marlin firearms business.
- Vista Outdoor paid $81 million for the Remington brand ammunition business.
- Sportsman's Warehouse purchased the Tapco parts and accessories business.
- Sierra Bullets bought the Barnes ammo business for $30 million.
- JJE Capital Holdings, which placed a $65 million stalking horse bid for Remington to kick off the auction process, acquired various firearms and accessories manufacturers.
- Investment company Roundhill Group acquired the historic Remington brand of guns, for $13 million.
- Franklin Armory bought the Bushmaster brand.
Altogether, the auction process raised over $150 million for the various pieces, and now that they are in the hands of better financed companies, the brands can grow once again.
Ready, aim, fire!
Ruger will be moving the manufacturing of the Marlin firearms business to its own facility. "The value of Marlin and its 150-year legacy was too great of an opportunity for us to pass up," said Ruger President and CEO Chris Killoy. "The brand aligns perfectly with ours and the Marlin product portfolio will help us widen our already diverse product offerings."
Acquiring Marlin during a strong industry recovery, and adding its well-regarded manufacturing capabilities to their production, means storied brand ought to be able to help Sturm, Ruger continue enjoying significant firearms sales growth.