Cerberus Capital Management is in discussions with investment bank Lazard about running an auction for Freedom Group, the gun manufacturer the buyout firm decided to sell in the wake of last week's school shooting in Newtown, Conn., said people close to the talks.

Lazard hasn't been hired yet and Cerberus could end up picking another bank to auction the gun maker, the people said. Cerberus could finalise hiring a bank to sell Freedom Group in coming days, one of the people said.