Riot Platforms is looking to expand with a $950 million deal to acquire Bitfarms

Crypto firm Bitfarms has accepted a takeover offer from rival Riot Platforms in a volatile post-halving environment. The deal, which is currently valued at $950 million, will see Riot acquire all of the outstanding shares of Bitfarms Ltd for $2.30 per Bitfarms common share.

According to Bankless Times calculations, the offer represents a premium of 13.9% to the last closing price of Bitfarms shares. In addition to the proposed transaction, Riot also amassed a 9.25% stake in Bitfarms, becoming the cryptocurrency mining company’s largest shareholder.

The transaction comes at a time when the entire Bitcoin mining industry is facing uncertainty, especially after the halving. The company’s press release stated that the transaction will create a vertically integrated Bitcoin mining company with a current capacity of approximately 1 gigawatt (GW) and a self-mining capacity of 19.6 exahashes per second (EH/s).

The company’s goal is to have up to 1.5 GW of generation capacity and 52 EH/s of capacity through independent mining by the end of the year. If these goals are achieved, the resulting company will be larger than any currently listed company in the industry.

Benjamin Yi, executive chairman of Riot, said:

The combination of Bitfarms and Riot would create the leading and largest publicly traded Bitcoin miner in the world, with a geographically diversified business well positioned for long-term growth.

Bitfarms shareholders will own up to 17% of the combined company as a result of the payment provided to them under the proposal, which consists of cash and shares of Riot common stock.

Riot’s previous deal fell through

The transaction announced today marks the second acquisition proposal from Riot to Bitfarms. On April 22, 2024, the proposal was first confidentially submitted to the Bitfarms Board.

However, Bitfarms management rejected this proposal without a meaningful conversation with Riot. Moreover, if true, recent claims in a lawsuit filed by Bitfarms’ recently fired CEO call into question the commitment of some executives to serving the interests of all shareholders.

Cryptocurrency miners face post-halving instability

This year has been a rough one for cryptocurrency miners with mining payouts halving, mining difficulties increasing, and sleek new Bitcoin Exchange Funds (ETFs) taking investor money. According to Reuters, even though Bitcoin’s value has surged 60% to $67,859 since hitting a record high in March, Marathon Digital and Riot Platforms – the two largest U.S.-listed mining companies – are down about 10% and 33%, respectively. so far this year.

Many smaller miners have less access to financing and less negotiating power with electricity producers, while some larger miners such as Riot have managed to maintain cash flow and thrive after the halving. Bloomberg in its report further highlighted that Stronghold Digital Mining Inc., a Bitcoin mining company, announced this month that it is considering various options that include selling the company.

Riot, with a total capacity of 700 megawatts, boasts the largest Bitcoin mine in North America, located in Texas. The Castle Rock, Colorado-based company is developing a second site in the state with up to one gigawatt of capacity. This amount of electricity could power two hundred thousand homes in Texas.

With the announcement of the current deal, Riot Platforms is likely looking forward to other expansions in the future.