Salmon Hog is basically a commodity. Norway and Chile keep Tassal honest, not Huon. It would be Sovereign self-sabotage to deny the merger for very little to no consumer protection benefit.
If Tassal moves on Huon it would have to increase Shares on Issue by around 40-50% depending on debt funding, premium offered to current Huon price and issue price of its own shares. Even if it was structured as a rights issue, the shorts would probably feel comfortable that there would be enough liquidity to exit 13% even if they didn’t get a direct allocation.
I suspect the short thesis has probably evolved as the position has grown. China ban initially, next would have been Tassal needing to raise capital to support its business through Covid – that seems well off the table given the last update. Now I suspect Huon takeover is supporting the position. It appears banks have put a gun to Huons head with a 31March timeframe if they want to self-determine their fate – So it is in play weather Tassal are ready or not.
I would be surprised if there is not a lot of noise in the capital markets as TGR fleshes out whether they can put together a deal that makes sense and that is giving the shorts a whiff of a better exit than unwinding on the market now.
Regardless of what is supporting the short position, it is of no worry to me because the business itself is not showing signs of things to worry about. Although Huon would be a bit of a mouthful now, better consumed later, when HUO is even weaker, but they may not be in total control of timing if other parties are interested in HUO.
All speculation of course.
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