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Hostile takeover: Riot Platforms proposes $950 million takeover of bitfarm to create world’s largest bitcoin miner

Posted on by darion

Riot Platforms Inc. (Nasdaq: RIOT) announced a proposed acquisition of Bitfarms Ltd. (Nasdaq/TSX: BITF) to create the world’s largest publicly traded bitcoin mining company.

The proposed acquisition, which has total equity of approximately $950 million, would see Riot acquire all of Bitfarms’ outstanding shares for $2.30 per share, which would represent a premium of 24% to Bitfarms’ one-month average share price.

TLDR

  • Riot Platforms proposed to acquire Bitfarms for $2.30 per share, which represents a 24% premium to Bitfarms’ average monthly share price.
  • The proposed acquisition would create the world’s largest publicly traded bitcoin mining company, with a geographically diversified business and a total hashrate of 52 EH/s by the end of the year.
  • Riot has amassed a 9.25% stake in Bitfarms, becoming its largest shareholder after Bitfarms’ board rejected the initial proposal without significant involvement.
  • Riot is concerned about Bitfarms’ management following the sudden firing of its CEO and allegations raised in a lawsuit filed by its former CEO.
  • Following Bitfarms’ annual general and special meeting on May 31, Riot plans to convene a special meeting to introduce new independent directors to Bitfarms’ board.

Riot Executive Chairman Benjamin Yi highlighted the potential benefits of the merger, stating:

“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.”

The proposed acquisition will create a vertically integrated bitcoin mining company by the end of the year, with up to 1.5 GW of power and the ability to self-mine 52 EH/s.

The combined entity will operate 15 facilities across the United States, Canada, Paraguay and Argentina, offering both geographic diversification and favorable energy arrangements.

Despite the potential benefits, Riot’s initial proposal, submitted privately to Bitfarms’ board on April 22, was rejected without significant engagement.

In response, Riot acquired a 9.25% stake in Bitfarms, becoming its largest shareholder. The company now plans to present its proposal directly to Bitfarms shareholders, citing concerns about Bitfarms’ management following the abrupt firing of its CEO, Geoffrey Morphy, and allegations raised in a lawsuit filed by its former CEO.

Riot CEO Jason Les expressed his concerns, stating:

“We are deeply concerned that the founders on the Bitfarms board – Nicolas Bonta and Emiliano Grodzki – may not be acting in the best interests of all Bitfarms shareholders.”

Les pointed to the sudden firing of the CEO without a transition plan and the allegations in the lawsuit that raise serious questions about the actions of some Bitfarms board members.

In light of these concerns, Riot plans to convene an Extraordinary Meeting following the Bitfarms Annual General and Extraordinary Meeting on May 31 to introduce new independent directors to the Bitfarms Board.

This move underscores Riot’s commitment to ensuring that the proposed acquisition is in the best interests of all shareholders.

The announcement of the proposed acquisition had an immediate impact on the market, with Bitfarms shares rising almost 6% to $2.13 as of 2:00 PM UTC after Riot’s announcement.

If the acquisition is successful, it could have far-reaching consequences for the bitcoin mining industry, potentially setting the stage for further consolidation and the emergence of a new global leader in the industry.