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Riot Platforms Inc. (RIOT) has aggressively entered the spotlight by securing a 9.25% stake in Bitfarms Ltd. (BITF). The company is now pushing forward with a public takeover bid for the Canadian Bitcoin miner, following Bitfarms’ refusal of a prior approach last month.
Riot’s concerns about Bitfarms’ corporate governance, heightened by recent management changes, underscore this move.
Riot Offers to Acquire Bitfarms at a 15% Premium
Riot has tabled an offer at $2.30 per share, combining cash and stock, valuing Bitfarms at about $950 million. In addition, Riot aims to reshape the governance of Bitfarms by proposing new directors at the forthcoming shareholders’ meeting.
However, on Friday, Bitfarms traded around $2. This means Riot has offered just a 15% premium. Danny Marques, a Merger and Acquisition advisor, believes the offer is disrespectful.
“As someone who’s advised on M&A deals, absolutely no one would entertain that offer unless you’re in a dire financial situation, which is not the case here. Riot clearly trying to test the waters and wet the beak. I wouldn’t be surprised if BITF entertains an offer in the $2.75-3.00 range,” Marques said.
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This strategic move is timely, given the crypto sector’s recent shifts. The Bitcoin halving has dramatically cut miners’ rewards, leading to projections of significant revenue losses. Consequently, large mining entities are eyeing mergers and acquisitions as vital strategies to maintain economic viability.
The CEO of another mining firm – CleanSpark, recently noted that the industry might soon consolidate around four major players – Riot, Marathon Digital, CleanSpark, and Cipher Mining. This consolidation is seen as essential for leveraging collective resources and enhancing operational efficiencies among leading miners.
The potential integration of Riot and Bitfarms would forge the largest Bitcoin miner globally based on projected computing power and output. This significant boost in Riot’s Bitcoin production would solidify its position alongside other industry giants like Marathon Digital Holdings Inc. and CleanSpark Inc.
Following the news of the potential merger, the market has responded positively. On Tuesday, pre-markets, Bitfarms’ shares increased by 9.35%, trading at $2.21.
Not to mention, Bitfarms is concurrently dealing with internal challenges. The company recently terminated its interim CEO, Geoffrey Morphy, following his lawsuit against Bitfarms, which sought $27 million in damages for breach of contract. This turmoil within the management team likely influenced Riot’s acquisition efforts.
Riot initially made its takeover bid to Bitfarms’ board on April 22. The board rejected the proposal without significant discussion about a potential deal. Under Riot’s offer, Bitfarms shareholders would control approximately 17% of the merged company.
“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,” Benjamin Yi, Executive Chairman of Riot, said.
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Moreover, Riot is scheduling a special meeting to appoint several new independent directors after Bitfarms’ annual meeting on May 31. This plan ensures a seamless transition and integration of both companies’ interests.