The a2 Milk Company said it had reached a settlement with Lion Dairy and Drinks over a labelling dispute.

"The parties have mutually agreed not to proceed with their cases against each other," a2 Milk said in a statement to the ASX.

The terms of the settlement are confidential. "The parties are very satisfied with the outcome and will remain focused on building and maintaining the strength
of their individual brands," a2 said.

Legal action between the two was to have been heard in the Australian Federal Court in late November but the hearing was put off until next year because of a scheduling issue.

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The case relates to a claim on Lion's packaging that Pura and Dairy Farmers branded milk "naturally contains A2 protein".

Chief executive Geoff Babidge told last month's annual meeting of the company: "We continue to be extremely confident in respect of achieving a successful outcome in respect of the court action."

A2, which markets an alternative A1 beta-casein-free milk, this year surpassed Fletcher Building and a clutch of other market heavyweights in terms of its market capitalisation.
The labelling case was being viewed in the market as being a possible hiccup in an otherwise strong performance from a2.

a2 Milk is listed on the NZX and the ASX.