Riot Platforms, Inc. (NASDAQ: RIOT) announced that it has made a proposal to the Bitfarms Board of Directors to acquire all of the outstanding shares of Bitfarms Ltd. (NASDAQ: BITF) at a price of US$2.30 per Bitfarms common share.
Riot also announced that it has “accumulated a 9.25% stake in Bitfarms to become Bitfarms’ largest shareholder.”
The proposal represents a 24% premium “to Bitfarms’ one-month volume-weighted average share price as of May 24, 2024.”
Further, it represents a 20% premium to Bitfarms’ share price “on April 19, 2024, the last day of trading prior to Riot’s initial proposal to the Bitfarms Board.”
The proposal represents approximately US$950 million “in total equity value.”
The consideration offered to Bitfarms’ shareholders under “the proposal consists of cash and Riot common stock and would result in Bitfarms’ shareholders owning up to approximately 17% of the combined company.”
This cash and stock Proposal would “provide Bitfarms’ shareholders with a substantial premium and immediate cash value, as well as significant potential for future value creation through participation in a financially and commercially stronger company with a well-defined strategy, led by an established and proven management team.”
The proposal was originally delivered “privately to the Bitfarms Board on April 22, 2024.”
However, the Bitfarms Board “rejected it without engaging in substantive dialogue with Riot.”
Moreover, new allegations in a lawsuit “brought by Bitfarms’ recently terminated CEO, if accurate, raise serious questions about whether certain directors are committed to acting in the best interests of all shareholders.”
As a result, Riot believes it is necessary “to disclose its Proposal directly to Bitfarms’ shareholders. Following Bitfarms’ Annual General and Special Meeting, scheduled for May 31, 2024, Riot intends to requisition a Special Meeting of Bitfarms’ shareholders to add new, well-qualified and independent directors to the Bitfarms Board.”
Riot and Bitfarms Together: Compelling Strategic Rationale
The proposed combination is compelling “for shareholders of both companies,” as it would:
- Create the premier and largest Bitcoin miner globally: The transaction would create a vertically-integrated Bitcoin mining company with approximately 1 GW of current power capacity and 19.6 EH/s of current self-mining capacity, with up to 1.5 GW of power capacity and 52 EH/s of self-mining capacity by year-end, a scale that Riot believes will be substantially larger than any other publicly listed Bitcoin mining company globally. Bitfarms’ vertically-integrated business model aligns well with Riot’s, and Riot is confident that a combined company will drive further strategic and financial benefits to both sets of shareholders.
- Provide geographic diversification of sites well-positioned for expansion and long-term growth: The combined company would have 15 facilities across the United States, Canada, Paraguay and Argentina, with up to 2.2 GW of total power capacity when fully developed. The global capabilities and geographic diversity of the combined sites will be highly differentiated and the Company believes this would allow for continued expansion into operating environments with favorable energy arrangements.
- Utilize Riot’s strong financial profile to drive future growth: Bitfarms will benefit from Riot’s strong balance sheet, with de minimis corporate debt, and more than US$700 million in cash on hand and 8,872 unencumbered Bitcoin as of April 30, 2024 – both approximately 10 times greater than that held by Bitfarms, enabling Riot to fully finance Bitfarms’ growth plans. Riot is also confident that the financial profile of the combined company will unlock for Bitfarms the access to public equity markets that Riot benefits from today.
Benjamin Yi, Executive Chairman of Riot, said:
“A combination of Bitfarms and Riot would create the premier and largest publicly listed Bitcoin miner globally, with geographically diversified operations well-positioned for long-term growth. We were disappointed to learn that the Bitfarms Board rejected our compelling Proposal without engaging in substantive dialogue with us. While we have long respected Bitfarms’ business and management team, we are confident that Bitfarms’ shareholders will agree that this Proposal represents a significantly more attractive alternative for Bitfarms than its standalone trajectory.”
Jason Les, Chief Executive Officer of Riot, added:
“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. The abrupt termination of the Bitfarms CEO without a transition plan in place at a critical period of execution for Bitfarms and the industry, as well as the allegations, if accurate, regarding the actions of certain members of the Bitfarms Board set out in the lawsuit filed by that recently terminated CEO, raise serious governance questions. This is why we intend to call a Special Meeting to give shareholders a chance to bring needed change to the Bitfarms Board and make repairing Bitfarms’ broken corporate governance and maximizing value for all Bitfarms’ shareholders their top priorities.”
The proposal to acquire Bitfarms has “been unanimously approved by the Board of Directors of Riot.”
While the Proposal is non-binding and subject “to customary conditions (including entering into a definitive transaction agreement), any transaction would not be subject to a financing condition nor require a Riot shareholder vote.”
There can be no assurance that a transaction “between Riot and Bitfarms will be consummated.”
Citi is serving as financial advisor and Paul, Weiss, Rifkind, Wharton & Garrison LLP and Davies Ward Phillips & Vineberg LLP are serving as legal advisors to Riot in connection with the proposed transaction.