Bitfarms to Acquire Stronghold Digital Mining in a $164M Deal

Highlights:

• Bitfarms will acquire Stronghold Digital Mining for $164 million, including $50 million in assumed debt.
• The acquisition boosts Bitfarms’ U.S. power capacity and aims to exceed 950 megawatts by 2025.
• Stronghold shareholders will receive 2.52 Bitfarms shares per share, reflecting a 71% premium.

Bitfarms Ltd., a leading Bitcoin mining firm, has announced its acquisition of Stronghold Digital Mining Inc. for $164 million. This transaction, including $125 million in equity and $50 million in assumed debt, aims to significantly boost Bitfarms’ power capacity and expand its U.S. operations.

The deal comes as the Bitcoin mining industry faces challenges due to the April halving event, which cut mining rewards by 50%. This reduction has forced companies to explore alternative strategies, such as acquisitions, to maintain profitability.

Strategic Acquisition to Enhance Operations

Bitfarms’s plan to acquire Stronghold Digital Mining is a strategic move to increase its hash rate and energy portfolio. Stronghold, known for its environmentally focused operations, owns two merchant power plants in Pennsylvania. These facilities convert mining waste into power, providing significant environmental benefits and making Stronghold a valuable asset for Bitfarms.

We are pleased to announce that #Bitfarms has entered into a definitive agreement to acquire @Stronghold_DM.

Stronghold brings to Bitfarms vertically integrated crypto asset mining operations and access to the strategically desirable PJM grid, the largest wholesale electricity… pic.twitter.com/HemcStdETS

— Bitfarms (@Bitfarms_io) August 21, 2024

According to the agreement, Stronghold shareholders will receive 2.52 Bitfarms shares for each share they hold. This represents a 71% premium to Stronghold’s 90-day volume-weighted average price on Nasdaq as of August 16, 2024. This deal not only offers Stronghold shareholders a significant return but also integrates their assets into Bitfarms’ expanding portfolio.

The merger will reportedly add 4 exahashes per second (EH/s) to Bitfarms’ hash rate, with the potential to exceed 10 EH/s by 2025. This expansion is crucial for Bitfarms as it seeks to remain competitive in the rapidly evolving Bitcoin mining landscape.

Expanding U.S. Operations and Energy Portfolio

Bitfarms’ acquisition of Stronghold is expected to increase its power capacity to 950 megawatts by the end of 2025. This includes integrating Stronghold’s 165 MW of nameplate power capacity and 142 MW of Pennsylvania-New Jersey-Maryland Interconnection (PJM) import capacity. The long-term plan also involves potentially increasing this import capacity to 790 MW.

The merger is anticipated to deliver an estimated $10 million in annual run-rate cost synergies. Additionally, Bitfarms plans to diversify its operations beyond Bitcoin mining, focusing on energy generation, high-performance computing (HPC), and artificial intelligence (AI) applications. This move aligns with the industry’s trend of exploring alternative revenue streams amid shrinking mining rewards. Ben Gagnon, CEO of Bitfarms, expressed his confidence in the acquisition.

Gagnon stated:

With this transaction, we expect to expand and rebalance our energy portfolio to 950 MW with nearly 50% in the U.S. by the end of 2025. We have visibility on multi-year expansion capacity up to 1.6 GW with approximately 66% in the U.S., up from approximately 6% today.

The acquisition, unanimously approved by the Boards of Directors of both companies, is expected to close in the first quarter of 2025, pending regulatory approvals and other customary closing conditions. Upon completion, Stronghold shareholders will own approximately 10% of the combined company.

In June, Riot Platforms (RIOT) decided to halt its proposal to acquire Bitfarms, opting instead to overhaul its board of directors before considering further takeover attempts. Riot Platforms now holds nearly 19% of Bitfarms’ shares.