Lees, which makes products such as snowballs, teacakes and macaroons, purchased Patisserie, a bakery that supplied cafes and hotels, in 2007 in a move to diversify its business away from confectionery.
“The takeover was concluded on both sides in good faith at an agreed market value.
However, due to unforeseen circumstances, anticipated sales did not materialise as originally forecast leading to a dispute between Lees and the former directors and shareholders of Patisserie,” said Lees.
The settlement, which was reached with no admission of liability on either side, will see Lees Foods receive about £225,000.
Shortly after being bought by Lees, Patisserie lost a major contract with the UK chain Costa Coffee, leading to big losses.
Patisserie generated annual turnover of about £3.5m at the time of the deal. But within weeks Costa Coffee, which accounted for three-quarters of its sales, said a quarter of that business would be sourced elsewhere.
Meanwhile the bakery company, Aryzta, which was formed last year from the merger between IAWS and Swiss bakery group Hiestand, said earlier this month that the business is in an excellent position to benefit from improved trading conditions and acquisitions when they arise.
The firm, whose brands include Cuisine de France and Delice de France, announced that its sales fell by 16 per cent to just under €730m in the first three months of its financial year, to the end of October.
Aryzta reported that revenues in its food Europe division declined by 11.4 per cent in the three month period, due mainly to the 'extremely tough' trading conditions in Ireland and the UK, but elsewhere in Europe - Switzerland, Germany, France and Poland - the business has displayed 'excellent defensive characteristics'.
However, CEO Owen Killian said that the business performed in line with expectations and the guidance provided in September and that the company was focused on acquisitions going forward.