Bitfarms Ltd. (TSX: BITF) (NASDAQ: BITF) is looking to buy Stronghold Digital Mining Inc. (NASDAQ: SDIG) in a USD$125 million deal, with the proviso that the company assume Stronghold’s outstanding USD$50 million debt.
Announced last Wednesday, the deal has received unanimous approval by both boards and is expected to close in Q1, 2025.
Stronghold is ostensibly a vertically integrated crypto asset mining company that mines Bitcoin, but it also has a side-gig providing environmental remediation and reclamation services.
As of June 30, 2024, Stronghold’s hash rate stands at 4.0 exahashes per second, backed by a current nameplate generated power capacity of 165 megawatts. With fleet upgrades, the company aims to increase its hash rate to approximately 10 exahash per second (EH/s) by 2025. Additionally, Stronghold has 142 MW of current import capacity within the Pennsylvania-New Jersey-Maryland Interconnection (PJM), with the potential to import up to 790 MW of additional power beyond 2025.
Stronghold owns over 750 acres of land and holds options on an additional 1,100 acres, along with two merchant power plants: the Scrubgrass and Panther Creek facilities in Pennsylvania.
Pennsylvania recognizes these power plants as an alternative energy source, similar to large-scale hydro, due to their proven and significant environmental benefits. Stronghold’s footprint also accesses the strategically valuable PJM grid, the largest wholesale electricity market in the United States, and, pending regulatory approvals, can import 142 MW of power from this source.
This strategic location within the PJM region offers Stronghold significant opportunities to generate and utilize competitively priced and flexible grid power for Bitcoin mining, energy trading, and high-performance computing and artificial intelligence.
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Facilities remove and recycle mining waste into power
In coordination with the Pennsylvania Department of Environmental Protection, these facilities remove hundreds of thousands of tons of mining waste and convert it into power through a highly specialized process.
“Having mined over 25,000 bitcoin with renewable energy to date, Bitfarms is also extending its environmental leadership with the acquisition of these reclamation facilities,” said Geoffrey Beard, CEO of Stronghold.
Additionally, the transaction could add up to 307 MW of power capacity, positioning Bitfarms to increase its energy portfolio to over 950 MW by the end of 2025. Multiple studies are underway to potentially boost the total import capacity by an additional 648 MW beyond 2025. Bitfarms also has numerous opportunities to leverage its proven expertise to successfully enhance energy efficiency and hash rate while integrating HPC/AI with Bitcoin mining operations.
The deal comes as Bitfarms fights off an acquisition attempt by another crypto firm. In May, Riot Platforms Inc (NASDAQ: RIOT) made an unsolicited offer to acquire Bitfarms for around $950 million. Bitfarms later described the offer as a “low-ball bid that significantly undervalued” the company and accused Riot of attempting to disrupt its alternatives review process.
“This is a thinly veiled ploy for Riot to pursue its own self-serving agenda and acquire Bitfarms at a discounted price,” Bitfarms stated.
After withdrawing the buyout offer, Riot began increasing its ownership stake in Bitfarms, initiating a hostile takeover. Riot now owns around 20 percent of Bitfarms. As part of this effort, Riot sought to remove existing Bitfarms directors, leading to the departure of company founder Nicolas Bonta this month.
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