Bitfarms Acquires Stronghold for $175M to Defend Against Riot’s Hostile Takeover Attempt

TLDR:

Bitfarms is acquiring Stronghold Digital Mining for $175 million in stock and assumed debt
The deal adds 307 megawatts of power capacity to Bitfarms’ operations
This acquisition may help Bitfarms resist a hostile takeover attempt by rival Riot
Stronghold shareholders will receive 2.52 Bitfarms shares for each share held
The deal aims to diversify Bitfarms’ revenue beyond Bitcoin mining

Bitcoin miner Bitfarms has agreed to buy rival Stronghold Digital for $175 million in stock and assumed debt. The deal, announced on August 23, 2024, will add 307 megawatts of power capacity to Bitfarms’ operations and put the company on track to increase its energy portfolio to over 950 megawatts by the end of 2025.

Under the terms of the agreement, Stronghold shareholders will receive 2.52 Bitfarms shares for each share they own. This represents a consideration of $6.02 per share, a 71% premium to Stronghold’s 90-day volume-weighted average price on Nasdaq as of August 16. The deal comprises $125 million in stock and $50 million in assumed debt.

We are pleased to announce that #Bitfarms has entered into a definitive agreement to acquire @Stronghold_DM.

Stronghold brings to Bitfarms vertically integrated crypto asset mining operations and access to the strategically desirable PJM grid, the largest wholesale electricity… pic.twitter.com/HemcStdETS

— Bitfarms (@Bitfarms_io) August 21, 2024

Bitfarms CEO Ben Gagnon stated, “After three years of ongoing discussions, I am proud to announce this transformative acquisition, which is a decisive step in securing a strong future for Bitfarms.”

The company aims to expand and rebalance its energy portfolio, with nearly 50% in the United States by the end of 2025.

The acquisition comes as Bitcoin miners face pressure from the recent halving event, which cut the reward they receive for adding blocks to the blockchain by 50%.

This reduction has pushed miners to seek cost-cutting measures and explore alternative income streams, such as high-performance computing and processing for artificial intelligence applications.

Industry experts suggest that this move may also help Bitfarms resist a hostile takeover attempt by rival Riot Platforms. Riot has been trying to acquire Bitfarms since April 2024 and currently owns a 19% stake in the company.

By increasing its size and value through the Stronghold acquisition, Bitfarms may become a more challenging and expensive target for Riot.

The deal is expected to diversify Bitfarms’ revenue sources beyond Bitcoin mining. Gagnon explained,

“By vertically integrating with power generation, expanding our energy trading capabilities, and securing two high potential sites for HPC/AI with significant multi-year expansion potential, we are executing our strategy to diversify beyond Bitcoin mining to create greater long-term shareholder value.”

Stronghold Digital Mining had been positioning itself for a potential sale. In its Q1 disclosure, the company expressed its intention to sell “all or part of the company,” although no timeline had been set.

Following the announcement, Stronghold’s shares rose approximately 55% in pre-market trading on Nasdaq, reaching $4.55. Bitfarms’ shares, however, saw a 7% decrease to $2.19.

The acquisition is the latest in a series of strategic moves by Bitfarms to fend off Riot’s takeover attempts.

Previously, Bitfarms implemented a “poison pill” plan to dilute its shares if any investor attempted to acquire more than a 20% stake in the company.