Synlait disputes A2 Milk's exclusivity cancellation
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More news: Synlait has fired back at A2 mIlk's move to cancel a long-running exclusivity deal for baby formula products sold in China, Australia and New Zealand, saying the agreement remains in place but may be terminated by either party with three years notice.
What they said: "Synlait disputes that the A2 Milk Company has the right to cancel the exclusivity arrangements. The purported cancellation relates only to the exclusivity arrangements. The A2 Milk Company has confirmed to Synlait that it will in practice maintain exclusivity with Synlait until such time as the matter is resolved," Synlait said in a statement to the ASX.
A2 Milk to cancel exclusivity deal with supplier Synlait
The news: Dairy producer A2 Milk plans to cancel a long running exclusivity deal with peer Synlait for infant milk formula products sold in China, Australia and New Zealand.
The numbers: A2 Milk sent Synlait a written notice late last week cancelling the exclusive supply rights in respect of stages 1 to 3 of its infant milk formula (IMF) products, including a2 Platinum. However, the manufacturing and supply agreement between the two companies will otherwise remain in place. Synlait shares, which are down nearly two-thirds this year, are in a trading halt on the NZX.
The context: A2 Milk cited a fall in Sylait’s "delivery in full and on time performance" levels as the reason for cancelling the exclusivity rights. The two companies have held a manufacturing and supply arrangement for more than a decade, with A2 also holding a nearly 20% stake in Synlait. However, both have seen sales drop amid regulatory uncertainty and weaker sales in China, the world’s biggest infant formula market.
What they said: "If Synlait disputes the notice, the matter will be resolved through good faith negotiations, followed by confidential binding arbitration as provided for under the dispute resolution provisions of the agreement. In the meantime, A2M has advised Synlait that it would agree to maintain Synlait’s exclusivity until any dispute is resolved.” A2 Milk said.
The source: ASX Announcement
