Riot Platform proposes to acquire Bitfarms for $2.30 per share

riot platformInc (NASDAQ: RIOT) has announced an offer to acquire all outstanding shares of Bitfarms Ltd (NASDAQ/TSX: BITF) for $2.30 per share.

According to Riot Platforms, the acquisition aims to create the world’s largest publicly traded Bitcoin miner.

The proposed acquisition price is a 24% premium to Bitfarms’ one-month trading volume-weighted average stock price as of May 24, 2024, and a 20% premium to Bitfarms’ stock price as of April 19, 2024.

The overall value of the offering is approximately $950 million in gross equity value.

Strategic Rationale for Acquisition

The proposed acquisition is intended to provide significant benefits to both Riot and Bitfarms shareholders. The combinations are:

Build the world’s largest Bitcoin miner, with a current power capacity of approximately 1GW and a current self-mining capacity of 19.6EH/s.

By the end of the year, the combined entity aims to have up to 1.5 GW of power capacity and 52 EH/s of its own mining capacity.

We provide geographic diversification with 15 facilities across the United States, Canada, Paraguay, and Argentina. The combined company will have a total power capacity of up to 2.2 GW when fully developed.

Leverage Riot’s strong financial profile, including over $700 million in cash and 8,872 unlimited Bitcoins, to drive future growth for Bitfarms.

Governance Issues and Shareholder Action

The proposal was privately presented to the Bitfarms board of directors on April 22, 2024, but was rejected without any substantive dialogue.

New allegations filed in a lawsuit by Bitfarms’ recently fired CEO raise questions about the board’s commitment to shareholder interests.

Riot plans to call a special meeting of Bitfarms shareholders to add new independent directors to the board of directors following Bitfarms’ annual general meeting and special meeting on May 31, 2024.

Riot President Benjamin Yi said: “The combination of Bitfarms and Riot will create the largest publicly traded Bitcoin mining company in the world. We are confident that Bitfarms’ shareholders will view this offering as a more attractive alternative to a standalone trajectory.”

Riot CEO Jason Les expressed concerns about Bitfarms’ board governance, pointing to the abrupt dismissal of the CEO without a transition plan and allegations against board members. Les emphasized the need for governance changes to maximize shareholder value.

Proposal Details and Next Steps

The offering includes a mix of cash and Riot common stock, which would result in Bitfarms shareholders owning approximately 17% of the combined company.

The offer is non-binding and subject to customary conditions, including the conclusion of a definitive transaction agreement.

Citi is acting as financial advisor on the transaction, and Paul, Weiss, Rifkind, Wharton & Garrison LLP and Davies Ward Phillips & Vineberg LLP are acting as legal advisors to Riot.

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