A recapitalisation programme and an investment of over R300-million are on the cards for South African manufacturer of engineered wood products Masonite.

Masonite’s 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.

The business rescue process – which officially ended this week – included the acquisition of the KwaZulu-Natal-based company by corporate investment and transactional advisory firm Jacobs Capital and its partner Black Bird Capital.

Creditors received 100c 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 also in the process of being reconstituted. In terms of the ratified transaction, the Millco Consortium has boughtthe 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.

“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 Jacobs Capital CEO Wessel Jacobs.

The addition of the Masonite business to the Jacobs Capital portfolio marks the third-largest investment by the group in 12 months, and it is expected to make a meaningful contribution to the yearly revenue of the company, with investments already exceeding R1.5-billion.

“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 R85-million, as well as R100-million in stockholding.

“Extensive recapitalisation of the production lines is necessary to ensure the mill runs at full capacity, which will ensure 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,” said Jacobs.

He added that the modernisation of the mill would prepare it for expansion into new markets and products. “This will contribute towards Masonite maintaining its position as a major producer of hardboard and timber products.

Black Bird Capital director Nkosinathi Nhlangulela noted that the company was 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.”