TORONTO and BROSSARD, Québec and NEW YORK, Aug. 21, 2024 (GLOBE NEWSWIRE) — August 21, 2024 — Bitfarms Ltd. (Nasdaq/TSX: BITF), a global vertically integrated Bitcoin data center company, and Stronghold Digital Mining, Inc. (Nasdaq: SDIG) have entered into a definitive merger agreement under which Bitfarms will acquire Stronghold in a stock-for-stock merger transaction. The Transaction is valued at approximately US$125 million equity value plus the assumption of debt valued at approximately US$50 million.
Stronghold is a vertically integrated crypto asset mining company focused on mining Bitcoin and environmental remediation and reclamation services. As of June 30, 2024, Stronghold has a hashrate of 4.0 EH/s and 165 MW of current nameplate generated power capacity, with the potential to bring its hashrate to approximately 10 EH/s in 2025 with fleet upgrades. In addition, Stronghold has 142 MW of current Pennsylvania-New Jersey-Maryland Interconnection (PJM) import capacity and provides a path to import as much as 790 MW of incremental potential power beyond 2025.
Stronghold owns over 750 acres of land with options on over 1,100 additional acres along with two merchant power plants: the Scrubgrass and Panther Creek Facilities in Pennsylvania. These two power plants are recognized by Pennsylvania as a Tier 2 Alternative Energy Source (the same category as large-scale hydro) for their proven and significant environmental benefits. Stronghold’s footprint also has access to the strategically valuable PJM grid, the largest wholesale electricity market in the U.S., and, subject to regulatory approvals, the ability to import 142 MW of power from this source. This strategic location within the PJM region creates significant opportunity for the combined company to both generate and utilize competitively priced and flexible grid power that can be used for Bitcoin mining, energy trading and HPC/AI. Together, 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.
The Transaction could add up to 307 MW of power capacity and is expected to put Bitfarms on track to increase its energy portfolio to over 950 MW by year-end 2025. There are multiple studies underway to potentially increase the total import capacity with an additional 648 MW beyond 2025 as well as numerous opportunities to leverage Bitfarms’ proven expertise to successfully enhance energy efficiency and hashrate and merge HPC/AI with Bitcoin mining operations.
Ben Gagnon, Chief Executive Officer of Bitfarms, said, “After three years of ongoing discussions, I am proud to announce this transformative acquisition, which is a decisive step in securing a strong future for Bitfarms. With this transaction, we expect to expand and rebalance our energy portfolio to 950 MW with nearly 50% in the U.S. by the end of 2025 and 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.”
“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. Stronghold has reclaimed thousands of acres of toxic waste, reducing the environmental footprint of historical mining activities and eliminating acid mine drainage that has been contaminating U.S. waterways since the 1800’s. Additionally, Stronghold’s Carbon Capture Projects have the potential to capture over 60,000 tons of carbon dioxide annually, providing Bitfarms additional revenue and making it one of the largest potential carbon capture projects globally,” said Arnold Lee, Director of Sustainability at Bitfarms.
Gregory Beard, Chief Executive Officer, President and Chairman of Stronghold, said, “We have been in conversation with Bitfarms for a long time. Having received and reviewed numerous bids in our Strategic Alternatives Review process, we believe that we found the ideal partner. Bitfarms has the vision and financial fortitude to unlock the value of Stronghold’s assets, and, given the accretion and future growth of the combined business, we are pleased that our shareholders will have the opportunity to participate in the significant upside potential. We look forward to leveraging Bitfarms’ operational expertise and proprietary data analytics system to further optimize our sites and return once-blighted land to local communities. I am confident that this combination is a unique opportunity to maximize value for the shareholders of both companies.”
Transaction Details
The Transaction has been unanimously approved by the Boards of Directors of both companies and is expected to close in the first quarter of 2025, subject to the receipt of Stronghold shareholder approval, applicable regulatory approvals, certain third-party consents and other customary closing conditions. Upon closing, Mr. Beard will contribute to the combined company in an advisory capacity.
Under the terms of the Merger Agreement, Stronghold shareholders will receive 2.52 shares of Bitfarms for each share of Stronghold they own, representing consideration per share of U.S. $6.02 and a 71% premium to the Stronghold 90-day volume-weighted average price on Nasdaq as of August 16, 2024. At close, Stronghold shareholders are expected to own just under 10% of the combined company, based on the current issued and outstanding shares of each company.
The Transaction delivers compelling transaction economics while achieving an estimated $10 million in annual run-rate cost synergies.
Advisors
Moelis & Company LLC is serving as a financial advisor to the Special Committee of the Board of Directors of Bitfarms, and Skadden, Arp, Slate, Meagher & Flom LLP, McMillan LLP, Peterson McVicar LLP, Fasken Martineau DuMoulin LLP and Firm 21m PLLC are serving as legal counsel. Houlihan Lokey Capital, Inc. delivered an opinion to the Special Committee of the Board of Directors of Bitfarms to the effect that, as of August 20, 2024, subject to the assumptions, limitations and qualifications contained therein, the exchange ratio provided for in the acquisition pursuant to the Merger Agreement is fair to Bitfarms from a financial point of view. Cohen & Company Capital Markets, a division of J.V.B. Financial Group, LLC provided a fairness opinion and is serving as exclusive financial advisor to Stronghold and Vinson & Elkins LLP is serving as lead legal counsel along with Blake, Cassels & Graydon LLP.
About Bitfarms Ltd.
Founded in 2017, Bitfarms is a global Bitcoin mining company that contributes its computational power to one or more mining pools from which it receives payment in Bitcoin. Bitfarms develops, owns, and operates vertically integrated mining farms with in-house management and company-owned electrical engineering, installation service, and multiple onsite technical repair centers. Bitfarms’ proprietary data analytics system delivers best-in-class operational performance and uptime.
Bitfarms currently has 12 operating Bitcoin data centers and two under development situated in four countries: Canada, the United States, Paraguay, and Argentina. Powered predominantly by environmentally-friendly hydro-electric and long-term power contracts, Bitfarms is committed to using sustainable and often underutilized energy infrastructure.
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About Stronghold Digital Mining, Inc.
Stronghold is a vertically integrated Bitcoin mining company with an emphasis on environmentally beneficial operations. Stronghold houses its miners at its wholly owned and operated Scrubgrass Plant and Panther Creek Plant, both of which are low-cost, environmentally beneficial coal refuse power generation facilities in Pennsylvania.
