Bitfarms Mining Corporation has announced the acquisition of Stronghold Digital Mining for an estimated $125 million in equity value.
The transaction considers an assumed debt of approximately $50 million, and it is anticipated to increase Bitfarms’ energy portfolio to over 950 megawatts by the end of 2025, which may add up to 307 megawatts of power capacity.
Bitfarms CEO Ben Gagnon expressed his satisfaction with the acquisition, stating, “I am proud to announce this transformative acquisition, which is a decisive step in securing a strong future for Bitfarms after three years of ongoing discussions.”
In pre-market trading on Nasdaq, Stronghold’s shares increased by approximately 55% to $4.55.
The Bitcoin halving has decreased mining rewards, putting pressure on mining firms. Additionally, their debt burden and previous inadequate administration have been sources of anxiety.
Shareholders will receive 2.52 shares for each share they possess
Stronghold shareholders will receive 2.52 shares of Bitfarms for each share of Stronghold they own, resulting in a consideration per share of $6.02. That is a 71% premium to the Stronghold 90-day volume-weighted average price on Nasdaq as of August 16.
When discussing the acquisition in greater detail, Gagnon stated:
“With this transaction, we expect to expand and rebalance our energy portfolio to 950 MW with nearly 50% in the US by the end of 2025 and have visibility on multi-year expansion capacity up to 1.6 GW with approximately 66% in the US, up from approximately 6% today.”
The statement predicts that Stronghold shareholders will own just under 10% of the combined company, based on each company’s current issued and outstanding shares.
Enhancing shareholder value through acquisition
Gagnon stated that Bitfarms intends to diversify beyond Bitcoin mining to generate greater long-term shareholder value by vertically integrating with power generation, expanding energy trading capabilities, and securing two high-potential sites for high-performance computing and artificial intelligence. These sites have significant multi-year expansion potential.
Stronghold Digital Mining has been contemplating selling the company for some time. In April, Stronghold submitted a registration statement to sell up to $250 million in securities to reduce its debt through share dilution.
The revenues of $27.5 million in the first quarter of 2024 were a 27% increase from the previous quarter and a 59% increase year over year for Stronghold. The revenue breakdown comprised $26.7 million from cryptocurrency operations, $700,000 from the sale of energy, and an additional $100,000 from “other activities.
