US private equity firm is selling its stake in the firearms company that made the AR-15 rifle used to shoot dead 20 children in a primary school in Newtown, Connecticut, last week.

Cerberus Capital Management said on Tuesday it was preparing for a sale of its investments in Freedom Group in the wake of the "unthinkable" massacre in the town where the father of its founder and chief executive, Stephen Feinberg, lives.

The investment fund had come under intense pressure from politicians and investors, including teachers' pension funds, to sell its stakes in America's biggest military-style rifle manufacturer.

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