Masonite business rescue completed through Jacobs Capital acquisition

Siyabonga Mncube (Black Bird Capital), Wessel Jacobs (Jacobs Capital), Nkosinathi Nhlangulela (Black Bird Capital) and Hilton Loring (Masonite).

The business rescue process, which started last year and officially ended this week, will see a recapitalisation programme and an investment of over R300m in the South African manufacturer based in Estcourt, KwaZulu-Natal.

Creditors received 100 cents in the rand and shareholders will be paid a 35% premium on the list price. Most importantly, all employment contracts were saved. The board of directors is in the process of being reconstituted.

“We have wasted no time, since the deal was approved by the Competition Commission in June. All the conditions of sale have been met. This is a very exciting time. We have teams in place looking at all aspects of the business and strategic planning sessions have produced short and longer term plans,” said Wessel Jacobs, chief executive of Jacobs Capital.

The addition of the Masonite business to the Jacobs Capital portfolio marks the third large investment by the group in 12 months and it is expected to make a meaningful contribution to the annual revenue of the company, whose investments already exceeds R1.5bn. Since its establishment in 2002, it has completed over 50 restructuring projects, including the successful turnaround of Da Gama, one of the largest textile mills in South Africa.

Jacobs said Masonite is a strong company and the deal was structured to ensure that all creditors were paid out, leaving the company with a debt free balance sheet and working capital of R85m as well as R100m in stock holding.

Mill modernisation

“Extensive recapitalisation of the production lines is necessary to ensure that the mill runs at full capacity, which will ensure that the company is able to return to sustainable profit as quickly as possible. A new product line is also among plans to ensure that Masonite keeps up with market trends.

“We believe that the modernisation of the mill will prepare it for expansion into new markets and products. This will contribute towards the business maintaining its position as a leading producer of hardboard and timber products.”

Nkosinathi Nhlangulela, director and shareholder added, “The company is now 100% locally owned, with a new board that understands local conditions and imperatives. We see this as a long-term commitment to both the business and the KwaZulu-Natal region. The new Millco leadership team is well placed to ensure a sustainable, ‘built to last’ business approach. It combines local management experience and expertise and offers access to strategies, systems and methodologies that have proven successful in turning around a number of South African manufacturing businesses.”

Hilton Loring, Masonite chief executive, said the company was back on track. “The lead management team is in place with renewed energy and entrepreneurial spirit. This combined with investment and a new product line will ensure the company meets growing demand and provides products of the same high quality and standards that customers expect.”

JSE listing still suspended

Jacobs said he was confident that the oldest company listed on the Johannesburg Stock Exchange was poised to regain its place in the economy. “We have an excellent team that can restore this business and take it to new heights.”

In terms of the ratified transaction, the Millco Consortium has purchased the Masonite mill. The Masonite forestry assets have been sold to Forestco, which is owned by R&B Timbers, and an agreement is in place that secures the supply of timber for Masonite.

The Estcourt Mill, in the KwaZulu-Natal Midlands, which produces hardboard, soft board and door panels, was damaged in an explosion in June 2014. This, together with a difficult trading environment, saw the company apply for business rescue in December last year.

Because Masonite has been in business rescue, its trading on the JSE has been suspended. Details of the listing on the Johannesburg Stock Exchange are still to be finalised.

Unlike other potential private equity investors, Jacobs Capital is able to draw on extensive in-house expertise to implement a strategy that will see Masonite taken out of business rescue within a short period. For more information, go to www.jacobscapital.co.za.