On a busy morning for M&A activity, Riot (RIOT, Financial) announced its proposal to acquire Bitcoin mining rival Bitfarms (BITF, Financial) for $2.30 per share, totaling an equity value of $950 million. This bid follows a private offer delivered by RIOT on April 22, 2024, which was rejected. While RIOT's Board of Directors unanimously approved the transaction, it's unclear if BITF will agree to the terms.
- The buyout terms represent a 24% premium to BITF's one-month volume-weighted average price and a 20% premium to BITF's share price on April 19, 2024. However, BITF shares are trading below the $2.30 acquisition price, indicating uncertainty about the deal's completion. If successful, the merger would create the world's largest Bitcoin miner.
- The combined company would have approximately 1 GW of current power capacity and 19.6 EH/s of current self-mining capacity, with potential growth to 1.5 GW of power capacity and 52 EH/s of self-mining capacity by year-end. The merger would also diversify operations geographically, spanning 15 facilities across the U.S., Canada, Paraguay, and Argentina.
- Despite a 70% surge in Bitcoin prices since late January, BITF shares have dropped over 30% year-to-date, making it a target for consolidation. The stock's volatility is partly due to leadership instability.
- Two weeks ago, BITF terminated former CEO Geoffrey Morphy's contract after he filed a $27 million lawsuit in Canada, claiming breach of contract, wrongful dismissal, and aggravated and punitive damages. In March, BITF announced plans to seek a replacement for Mr. Morphy, who had been with the company since 2020.
- Nicolas Bonta, Chairman of the Board, is currently serving as interim CEO until a permanent replacement is found. With the CEO position in flux, RIOT likely saw this as an opportune moment to make a move.
Given BITF's initial dismissal of RIOT's offer, it seems unlikely that the latest deal will be accepted, potentially leading to a contentious takeover effort.
