The offer equates to $6.02 per share for Stronghold versus its close last of $2.93.
Stronghold said in May it was considering its strategic options, while Bitfarms is itself dealing with unwanted attention from Riot Platforms.
Bitcoin miner Bitfarms (BITF) said it agreed to buy rival Stronghold Digital (SDIG) for $175 million in stock and assumed debt as it looks to diversify its revenue sources beyond the production of cryptocurrency.
The offer comprises $125 million in stock based on 2.52 Bitfarms shares for each one of Stronghold, a premium of 71% to Stronghold's 90-day volume-weighted average price on Nasdaq as of Aug. 16, Bitfarms said in a statement. It equates to $6.02 per share versus SDIG's close last night of $2.93. Shares are currently higher by 64% premarket to $4.80. BITF is lower by 7% to $2.19.
Bitcoin miners have been coming to terms with April's 50% cut in the reward they receive for adding blocks to the blockchain. The reduction puts pressure on the industry to cut costs, particularly power usage, and replace older equipment with more energy-efficient rigs. While the event was no surprise – it occurs roughly every four years and companies had plenty of warning to prepare for it – it was still expected to unleash a "survival of the fittest" battle and send the miners looking for alternative income streams such as high-performance computing (HPC) and processing for artificial intelligence (AI) applications.
“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," CEO Ben Gagnon said in the statement.
"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.”
Bitfarms is itself fending off an approach by Riot Platforms (RIOT), which in June abandoned an attempt to buy the company in favor of overhauling the board and building its stake in the Toronto-based company before engaging in further takeover attempts. It now owns almost 19% of Bitfarms.
Stronghold in May said it was exploring strategic alternatives that could include the sale of the company.
UPDATE (Aug. 21, 11:49 UTC): Adds price breakdown in second paragraph, stock reactions in last paragraph.
UPDATE (Aug. 21, 12:10 UTC): Adds reward halving third paragraph, CEO quotes in fourth, fifth.