Cryptocurrency mining giant Bitfarms has entered a definitive merger agreement to acquire Stronghold Digital in a stock-for-stock merger transaction.

Canadian crypto miner Bitfarms is set to acquire its U.S.-based rival Stronghold Digital in a transaction valued at approximately $175 million, including $125 million in equity value and $50 million in assumed debt.

In an Aug. 21 press release, Bitfarms stated that acquiring Stronghold would bring significant assets, including a 4.0 EH/s hashrate and 165 MW of power capacity as of June 2024. The company owns over 750 acres of land and two power plants in Pennsylvania.

Despite the news, Bitfarms shares (BITF) plunged 7.2% to $2.19 in pre-market trading, based on Nasdaq data.

Expansion of Energy Portfolio

The merger is expected to expand Bitfarms’ energy portfolio, increasing its capacity to over 950 MW by the end of 2025, with potential future expansions bringing total capacity to 1.6 GW. Bitfarms chief executive Ben Gagnon labeled the acquisition a significant step, saying the company expects to have “visibility on multi-year expansion capacity up to 1.6 GW with approximately 66% in the U.S., up from approximately 6% today.”

“By vertically integrating with power generation, expanding our energy trading capabilities and securing two high potential sites for HPC/AI with significant multi-year expansion potential, we are executing our strategy to diversify beyond Bitcoin mining to create greater long-term shareholder value.”

– Ben Gagnon, Bitfarms CEO

Merger Details

Bitfarms has stated that the merger, which both companies’ boards have unanimously approved, is expected to close in the first quarter of next year, pending shareholder and regulatory approvals.

Under the agreement, Stronghold shareholders will receive 2.52 shares of Bitfarms for each share owned. This represents a 71% premium to Stronghold’s 90-day volume-weighted average price on the Nasdaq as of Aug. 16. The combined company is projected to achieve $10 million in annual cost synergies post-merger.

Context and Background

The merger announcement comes as Bitfarms faces a takeover attempt by Riot Platforms, a competing Bitcoin mining company. Earlier, Riot acquired 1 million common shares of Bitfarms, raising its stake to approximately 18.9%. That move followed Riot’s $950 million takeover bid earlier this year, which was withdrawn after failing to gain traction with Bitfarms’ board.

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