The dual-listed dairy company a2 Milk has agreed to pay its New Zealand supplier almost $NZ25 million ($A22.7 million) to settle a long-running dispute between the two parties.
A2 Milk Company and Synlait Milk had been at loggerheads since October when a2 tried to cancel its arrangement to exclusively use Synlait milk for its a2 Platinum infant formula product.
A2 said it had the right to cancel the deal after Synlait failed to meet product volume targets for 2022/23 while Synlait said the notice was not valid under their supply agreement and issues regarding prices and intellectual property of a2 Milk baby formula product specifications.
Following a process of binding arbitration, the companies agreed the October cancellation notice was valid and that a2 Milk had the right to source milk from any supplier, although Synlait said it expected a2 would still use it in the short term.
"Settling these disputes is another positive step forward in our business recovery plan," Synlait chief executive Grant Watson said.
As part of the deal, a2 Milk will make a one-off payment to Synlait of $NZ24.75 million.
Cash-strapped Synlait has also agreed to hold a capital raise as part of the deal and a2, a major shareholder, has agreed to participate.
The parties also agreed that a2 Milk owns the intellectual property rights for its infant milk formula product specifications and that Synlait would continue to meet annual product targets.
A2 Milk shares finished up 4.3 per cent to $7.01, while Synlait shares jumped 21.8 per cent to 33.5c.
