Synlait and a2 Milk settle infant formula dispute
The dispute is over manufacturing rights
19 August 2024
2 minute read
By: New Zealand's Synlait Milk and its shareholder a2 Milk have conditionally resolved disputes over exclusive manufacturing rights for some of a2 Milk's infant milk formula products, Reuters reported, citing the companies on Friday.
Shares in Synlait surged 16.7% to NZ$0.35 by 0008 GMT, their highest in more than a month, while those in a2 Milk rose 0.8% to NZ$7.480.
A2 Milk, Synlait Milk's second-largest shareholder with a 19.83% stake, issued cancellation notices in September last year regarding their manufacturing and supply agreement, which was signed more than seven years ago to increase production of some infant formula products.
Synlait has now acknowledged the validity of these notices and said its exclusive rights to manufacture and supply stages 1 to 3 of a2 Milk's current infant milk formula products will come to an end on Jan. 1, 2025.
Despite the loss of exclusivity, Synlait has obligations to procure a minimum annual volume of products and maintain certain priority arrangements for a2 Milk, the companies said in separate statements.
Under the settlement, "Synlait continues to hold the Chinese regulatory State Administration for Market Regulation (SAMR) registration which is attached to Synlait's Dunsandel manufacturing facilities," a2 Milk said in its statement.
"The parties have agreed to resolve the various pricing and other disputes between them with a2MC to make a one-off payment to Synlait of NZ$24.75 million ($14.81 million)," a2 Milk said.
Synlait's settlement hinges on successfully completing its equity raise and refinancing its banking facilities, with a2 Milk committed to supporting the issuance, the companies said.
The arbitration hearing has been adjourned and will be discontinued if the settlement conditions are met.
($1 = 1.6711 New Zealand dollars)
