Riot Platforms has proposed acquiring Bitfarms at $2.30 per share. This acquisition aims to create the largest publicly listed Bitcoin miner. Riot already holds a 9.25% stake in Bitfarms, making it the largest shareholder. The company plans to call a special meeting of Bitfarms’ shareholders to appoint new independent directors.

The proposal offers a 24% premium to Bitfarms’ one-month volume-weighted average share price as of May 24, 2024. A 20% premium to its share price on April 19, 2024. The acquisition includes cash and Riot common stock, allowing Bitfarms’ shareholders to own about 17% of the combined company. Riot disclosed that this proposal was made privately on April 22, but the Bitfarms Board rejected it without important dialogue.

Riot’s strategic and financial benefit

Riot argues that combining the two companies would create significant strategic and financial advantages. The new body would establish a vertically integrated Bitcoin mining company with about 1 GW of power capacity and 19.6 EH/s of self-mining capacity. These figures are expected to expand to 1.5 GW and 52 EH/s by year-end. This growth would position it as the largest Bitcoin mining company globally.

The merger would also enhance geographic diversification. When fully developed, the combined entity would have 15 facilities across the U.S., Canada, Paraguay, and Argentina. It would have up to 2.2 GW of power capacity. Riot has over $700 million in cash and minimal debt. This financial strength would support Bitfarms’ growth plans and improve access to public equity markets.

Reactions and governance concerns

Benjamin Yi, Executive Chairman of Riot, stated the proposal’s strategic fit and growth potential and expressed disappointment at Bitfarms’ swift rejection. Riot’s CEO, Jason Les, raised concerns about Bitfarms’ governance, citing the abrupt termination of its CEO and related allegations as troubling. Les found the lack of engagement from Bitfarms’ Board concerning.

The proposal, approved collectively by Riot’s Board, is non-binding and subject to customary conditions. Riot’s financial advisor for this transaction is Citi, with legal advice from Paul, Weiss, Rifkind, Wharton & Garrison LLP, and Davies Ward Phillips & Vineberg LLP. Riot remains committed to pursuing the acquisition to create a leading Bitcoin mining company with improved operational and financial capabilities.

Industry impact and strategic focus

Riot’s proposal has attracted significant industry attention. The acquisition is a strategic move to join power and resources in the competitive Bitcoin mining sector. Combining forces would allow Riot to achieve operational efficiencies and expand its market presence. The merger would bring together two significant players in the Bitcoin mining space, capitalizing on their strengths to enhance productivity and profitability.

The proposed acquisition offers considerable financial benefits. Riot’s offer includes a premium on Bitfarms’ recent share prices, providing immediate value to shareholders. The inclusion of Riot’s common stock in the consideration mix follows the interests of both companies’ shareholders, creating a sense of shared ownership and commitment to the combined body’s success.

Geographic diversification and operational scale

Riot’s strategy also focuses on geographic diversification. Expanding its footprint across multiple countries would reduce operating risks in a single region. The diverse geographic presence would provide access to a broader range of energy sources and regulatory environments, enhancing the endurance and sustainability of the mining operations.

The acquisition would significantly boost Riot’s power and mining capacities. The projected increase to 1.5 GW of power capacity and 52 EH/s of mining capacity represents substantial operational scaling. This capacity level would solidify the combined entity’s position as the largest Bitcoin miner and enable it to capture a larger market share.

Riot remains committed to the acquisition and is prepared to engage with Bitfarms’ shareholders directly to seek their support for the proposed board changes. Riot believes that a reconstituted board with new independent directors would be more receptive to the acquisition’s strategic advantages.

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