Riot proposes hostile takeover of Toronto-based Bitfarms to create world’s largest publicly listed Bitcoin miner

U.S.-based crypto mining company Riot Platforms Inc. RIOT-Q launched a hostile bid to acquire Toronto-based rival Bitfarms Ltd. BITF-T, revealing in a filing with securities regulators it had made a non-binding offer of US$2.30 a share, or US$950-million in total, in a letter to the board on April 22.

Riot owns North America’s largest bitcoin facility, and if the acquisition goes through, it would become the largest publicly listed bitcoin miner globally.

Just days after the bitcoin halving event – which reduced the rate at which new coins are created – Riot made a private offer to buy Bitfarms that they say the company “swiftly” rejected.

In a second letter to Bitfarms on Tuesday, Riot revealed it owned 9.25 per cent of the target company’s shares, making it the largest shareholder.

The company intends to request a special meeting after Bitfarms annual general meeting on May 31 to add new independent directors to the board.

Bitfarms did not respond to a request for comment by late Tuesday afternoon.

Riot offered shareholders a mix of cash and Riot common stock, which would give Bitfarms’s shareholders 17 per cent of the combined company’s stock. The proposal also offered a 24-per-cent premium to Bitfarms’s one-month, volume-weighted average share price as of May 24.

Riot noted in its letter that it is concerned over the termination of Bitfarms’ former chief executive officer Geoffrey Morphy in early May. Mr. Morphy filed a US$27-million lawsuit against the company in the Ontario Superior Court for breaches of contract and wrongful dismissal.

Riot said they want Bitfarms to be their international arm as they pursue a global expansion. The company’s statement noted the combined firm would have 15 facilities across the United States, Canada, Paraguay and Argentina.

“A combination of Bitfarms and Riot would create the premier and largest publicly listed bitcoin miner globally, with geographically diversified operations well-positioned for long-term growth,” Benjamin Yi, executive chairman of Riot, said in a statement.

Riot added that the acquisition is also beneficial for the two companies because it provides geographical diversification, and Bitfarms would have access to Riot’s strong balance sheets.

Bitfarms shares jumped 7.4 per cent Tuesday morning after Riot made its letters public before markets opened. The stock ended the day flat at US$10.34.

On April 19, the reward for mining bitcoin was halved from 6.25 bitcoins per mined block to 3.125 bitcoins. This event takes place every four years to maintain scarcity of the coins in a bid to counter inflation.