Riot Platforms has put forth a proposition to acquire Bitfarms for around $950 million, offering a 24% premium to Bitfarms’ one-month volume-weighted average share price as of May 24.

The decision by Riot to make a hostile takeover bid follows Bitfarms’ Board of Directors’ rejection of its private proposal without substantial engagement, as stated in the press release.

The bid, initially made privately on April 22, coincides with internal turmoil at Bitfarms, including a CEO dispute and ensuing lawsuit.

The aim of the acquisition is to establish the world’s largest publicly listed Bitcoin miner by combining Riot’s financial strength and strategic vision with Bitfarms’ existing operations. Riot Executive Chairman Benjamin Yi remarked:

“A merger of Bitfarms and Riot would establish the foremost and largest publicly listed Bitcoin miner globally, with operations diversified across different regions poised for long-term expansion.”

Riot, already the leading shareholder of Bitfarms with a 9.25% stake, is offering a combination of cash and common stock, resulting in Bitfarms’ shareholders owning roughly 17% of the merged entity.

The proposed merger would form a Bitcoin mining powerhouse with approximately 1 GW of current power capacity and 19.6 EH/s of self-mining capacity, potentially rising to 1.5 GW and 52 EH/s by year-end.

Citi is acting as Riot’s financial advisor, while Paul, Weiss, Rifkind, Wharton & Garrison LLP, alongside Davies Ward Phillips & Vineberg LLP, are serving as legal advisors.

Bitfarms has yet to publicly respond to Riot’s latest proposal.

CEO Dispute

Riot’s announcement comes amidst significant upheaval at Bitfarms related to the dismissal of its former CEO, Geoffrey Morphy, who has filed a lawsuit against the company for wrongful termination.

In March, Bitfarms announced Morphy’s departure later in the year upon finding a successor, aiming for a smooth transition in leadership.

However, Morphy filed a $27 million lawsuit against the company on May 10, alleging breach of contract and wrongful termination. The lawsuit, seeking $27 million in damages, included accusations against certain members of the Bitfarms Board of Directors.

Morphy’s lawsuit prompted an immediate acceleration of his termination on May 13.

Bitfarms appointed co-founder and Chairman Nicolas Bonta as interim CEO post-Morphy’s dismissal. The company has refuted Morphy’s claims and is prepared to vigorously defend itself.

Governance Concerns

Morphy’s sudden exit and ensuing legal battle have raised substantial governance concerns within Bitfarms, especially during a critical period for the company and the broader mining industry.

The discord has exacerbated Bitfarms’ challenges, including operational and market pressures following the recent Bitcoin halving, prompting unease among shareholders, including Riot.

Riot executives, led by CEO Jason Les, have expressed apprehensions about Bitfarms’ governance post the dispute, particularly the actions of co-founders Bonta and Emiliano Grodzki.

Les stated in a social media post:

“We are deeply concerned that the founders on the Bitfarms Board may not be acting in the best interests of all Bitfarms shareholders. The abrupt termination of the Bitfarms CEO raises serious governance questions.”

Riot intends to call for a special shareholders meeting after Bitfarms’ Annual General and Special Meeting on May 31, 2024, to propose new independent directors for the Bitfarms Board.