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Bitcoin mining company Bitfarms and its competitor Stronghold Digital Mining have finalized a merger agreement recently. Bitfarms announced its agreement to purchase Stronghold Digitals in a stock-for-stock merger deal.
This type of deal enables companies to merge without requiring significant cash outlays. Also, shareholders of both companies receive shares in the combined entity, aligning their interests and avoiding immediate tax consequences.
Partnership based on Mutual Benefits
The acquisition cost is about $125 million in stock, equivalent to 2.52 Bitfarms shares for each Stronghold share. This deal represents a 71% premium to Stronghold’s 90-day volume-weighted average price. Also, Bitfarms will take on Stronghold’s debt valued at $50 million.
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In a statement, Bitfarms CEO Ben Gagnon said the merger deal will significantly increase the company’s presence in the United States. The company aims to expand its energy portfolio to over 950 megawatts (MW) by the end of 2025. On the other hand, Stronghold has a power capacity of 165 MW. The company hopes to boost its power capacity to 307 MW through this merger.
Notably, both companies anticipate the merger will create $10 million in yearly cost synergies. Upon the merger announcement, Stronghold Digital’s stock in premarket trading boosted to almost 60%. Unfortunately, Bitfarms stock took a hit, falling nearly 8% in pre-market trading.
Significance of the Merger Deal to Stronghold
This deal comes as a relief for the Pennsylvania-based Bitcoin miner, considering its enormous debts. Regardless of its computational speed for solving equations on the Bitcoin blockchain, it still has many debts to repay.
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The company, which filed for an Initial Public Offering (IPO) in 2021, had to send back more than 26,000 mining tools to New York Digital Investment Group (NYDIG) to significantly reduce its debt. Now that Bitfarm has somewhat alleviated its financial burden by taking over 50 million worth of debt, Stronghold can focus on its growth and development.
Riot Platform Continues to Crackdown on Bitfarms
Bitfarms is still defending itself against Riot Platforms’ (RIOT) acquisition attempt. The Canadian-based Bitcoin miner was using a “poison pill” defense strategy against RIOT, which was put to an end by a Canadian Tribunal in July. This comes after RIOT withdrew its bid to purchase the company.
In the same month, Bitfarms boosted its Bitcoin production, leaving its treasury at 905 Bitcoins, worth over $57 million. Unexpectedly, RIOT changed its strategy to focus on changing Bitfarms’ board members. Riot even increased its ownership in the company before trying to acquire it again. Presently, RIOT holds nearly 19% of Bitfarms.
