Riot Platforms has unveiled a bold strategy, proposing a substantial acquisition of Bitfarms for a staggering $950 million. This move represents a significant premium, a generous 24% increase over Bitfarms' one-month volume-weighted average share price, calculated as of May 24.

The decision to pursue this acquisition through a hostile takeover bid was triggered by Bitfarms' Board of Directors' reluctance to engage substantively with Riot's previous private proposal. This lack of engagement prompted Riot to take its offer public, signaling its determination to proceed with the acquisition.

This proposal comes at a tumultuous time for Bitfarms, which has been grappling with internal discord, notably a dispute involving its CEO, Geoffrey Morphy. Morphy's abrupt departure and subsequent lawsuit against the company for wrongful dismissal have exacerbated existing governance concerns.

Bitfarms initially announced Morphy's planned departure in March, intending for a smooth transition as they searched for a replacement CEO. However, Morphy's subsequent lawsuit, seeking a substantial $27 million in damages, accelerated his termination, further destabilizing the company's leadership.

In the midst of this turmoil, Riot sees an opportunity to create a powerhouse in the Bitcoin mining industry. By combining its financial strength and strategic vision with Bitfarms' established operations, Riot aims to establish the world's largest publicly listed Bitcoin miner.

Riot, already a significant shareholder in Bitfarms with a 9.25% stake, proposes a deal structured with a blend of cash and common stock. This arrangement would ensure that Bitfarms' current shareholders maintain a stake of approximately 17% in the merged entity.

The merger is projected to catapult the combined entity into a dominant position in the Bitcoin mining sector. With a current power capacity of approximately 1 GW and a self-mining capacity of 19.6 EH/s, the merged company anticipates further expansion to 1.5 GW and 52 EH/s by year-end.

To navigate this complex transaction, Riot has enlisted Citi as its financial advisor, with legal counsel provided by Paul, Weiss, Rifkind, Wharton & Garrison LLP, alongside Davies Ward Phillips & Vineberg LLP.

Despite Riot's ambitious proposal, Bitfarms has yet to issue a public response, leaving the future of the acquisition uncertain. However, Riot is already looking beyond the acquisition, eyeing governance reforms at Bitfarms. Riot intends to propose new independent directors at Bitfarms' upcoming shareholders meeting, scheduled to take place after the Annual General and Special Meeting on May 31, 2024.