Key Points
- Bitfarms Ltd plans to acquire Stronghold Digital Mining Inc for $125 million in a stock deal.
- The acquisition aims to increase Bitfarms’ mining capacity, especially following the recent Bitcoin halving event.
Bitfarms Ltd, a Bitcoin mining firm based in Canada, intends to purchase Stronghold Digital Mining Inc for approximately $125 million. The acquisition will be made via a stock deal, and Bitfarms will also assume around $50 million of Stronghold’s debt.
The Acquisition Deal
Shareholders of Stronghold will receive 2.52 shares of Bitfarms for each of their shares. This deal signifies a premium of nearly 70% of Stronghold’s 90-day volume-weighted average price on Nasdaq as of August 6.
Bitfarms is looking to expand beyond its current capacity through this acquisition, particularly as the industry faces potential revenue issues following the April Bitcoin halving event. Stronghold, with its power generation and connection to local grids, will provide additional power for Bitfarms to mine more Bitcoin.
Bitcoin halving events, which usually occur every four years, result in a 50% reduction in miners’ incentives. This typically makes the business less profitable if prices remain the same. As a result, miners look for new ways to increase their Bitcoin production to stay competitive.
Stronghold, based in Kennerdell, Pennsylvania, uses waste coal combustion to generate electricity for mining purposes. This sustainable approach differentiates the company, making it an attractive acquisition target for Bitfarms.
At the time of writing, Stronghold’s shares have risen by 63% in the pre-market to $4.78. Despite reporting a $21.3 million loss for the second quarter of 2024 on $19.1 million in revenue, Bitfarms, with its $41.5 million in revenue in the second quarter, is in a good position to acquire Stronghold.
Bitfarms and Riot Platforms
This acquisition announcement follows a takeover attempt by Riot Platforms Inc, another prominent Bitcoin miner. Riot, which owns nearly 19% of Bitfarms, proposed an unsolicited $950 million offer to purchase the company in June.
In response, Bitfarms implemented a “poison pill” defense strategy to prevent hostile takeovers. However, the Ontario Capital Markets Tribunal ordered Bitfarms to stop the strategy. Riot has since intensified its acquisition strategy by purchasing an additional 10 million shares of Bitfarms.
Riot is one of the world’s largest Bitcoin mining companies, with facilities in Texas, while Bitfarms operates globally, including in South America.
Over the year, Stronghold’s stock has dropped by nearly 60%, Riot by 48%, and Bitfarms by 19%. During the same period, Bitcoin increased by 42% to trade at $59,532.
