Synlait (ASX:SM1) share price 8% higher on land covenant settlement

Prior to its trading halt, the Synlait Milk Ltd (ASX: SM1) share price was 8% higher on news the company had settled a land dispute.

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The Synlait Milk Ltd (ASX: SM1) share price was 8% higher today after the New Zealand-based dairy company settled its Pokeno land covenant legal dispute. The company has since paused trading, pending a further announcement.

Pokeno land decision

In February 2018, Synlait announced the conditional purchase of 28 hectares of land in Pokeno to establish its second nutritional powder manufacturing site.  

In November 2018, the High Court removed covenants over the land that would hinder Synlait's development. Synlait then took ownership of the land. On May 2019, the Court of Appeal overturned a previous High Court decision to remove historic covenants, which, if left in place, would hinder Synlait's intention to develop the site. 

In June 2019, Synlait filed an application for leave to appeal to the Supreme Court to have this decision overturned. 

The company's FY20 announcement back in October revealed that Synlait had made a reasonable settlement offer and was working towards one of two outcomes which it believed to be in the best interest of all – a reasonable settlement offer, or a court outcome. 

The Pokeno site 

Synlait's Pokeno site is a newly constructed facility that only began production in late September 2019. The facility has the capacity to produce 45,000 metric tonnes of product and capable of producing a full suite of nutritional, formulated powders including infant-grade skim milk, whole milk and infant formula base powders. 

Synlait share price higher on settlement agreement

On Monday, the company announced that it had reached a settlement with New Zealand Industrial Park Ltd and Karl Ye regarding the historic land covenants at the company's Pokeno site.

Synlait CEO Leon Clement commented:

Synlait and New Zealand Industrial Park are committed to work collaboratively for the benefit and integration of the Pokeno community and are pleased to have this behind us. We are also pleased to provide certainty for Synlait's shareholders, customers, farmer suppliers and staff.

Further details of the settlement agreement could not be disclosed due to confidentiality. However, the company does state that the settlement price was reasonable and not material to Synlait. 

At the time of writing, Synlait shares are in a trading halt. Prior to this occurring, the Synlait share price had shot up by more than 8% on the news, trading for $5.54 per share.

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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