Synlait shares rally by 10% after Pokeno settlement

Synlait's Pokeno facility. Photo / NZ Herald

Shares in Synlait Milk rallied by 9.6 per cent after the company said it had reached a settlement over its disputed Pokeno factory site.

By late morning the stock was had rallied to $5.60, up 49c from Thursday's close.

The company said it had reached an settlement with New Zealand Industrial Park Limited and Karl Ye over historic land covenants at the company's Pokeno site, ending several months of uncertainty over the now-completed plant built there.

Terms were not disclosed.

"Synlait and New Zealand Industrial Park are committed to working collaboratively for the benefit and integration of the Pokeno community and are pleased to have this behind us," Synlait chief executive Leon Clement said.

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"We are also pleased to provide certainty for Synlait's shareholders, customers, farmer suppliers and staff."

Further details of the settlement agreement will not be disclosed due to confidentiality, he said.

But Clement said the settlement price was "reasonable and not material to Synlait".

The Supreme Court has been informed that a settlement has been reached.

Forsyth Barr analyst Chelsea Leadbetter said today's announcement removed a key risk for the company.

"Clearly today, in terms of its ability to move forward, it is a good outcome," she said.

"For the company and its shareholders, it's been an overhang for a while, so it will be good for them to move forward."

Synlait said on Thursday that it had signed up a new customer, which will put more business through the Pokeno plant.

In 2018, Synlait bought land at Pokeno and began building a dairy processing plant.

Part of the purchase agreement included Synlait securing a release from a covenant on the land that restricted activity to farming, forestry and lifestyle blocks.

Permission was only granted by the High Court in November 2018, when construction was well underway.

A neighbouring landowner took the decision to the Court of Appeal, which reinstated the
covenants.

Synlait had been granted leave to appeal to the Supreme Court and a hearing took place in early June.

Uncertainty has weighed on Synlait's share price.

Synlait is just under 20 per cent owned by its biggest customer, a2 Milk.