In a decisive maneuver to fortify its position within the volatile cryptocurrency mining landscape, Bitfarms Ltd., a prominent Bitcoin (BTC) mining firm, has announced the acquisition of Stronghold Digital Mining Inc. in a stock deal valued at approximately $125 million. This strategic acquisition, as reported by Bloomberg, comes at a critical juncture as Bitfarms fends off a hostile takeover attempt by Riot Platforms Inc.

The terms of the deal stipulate that Stronghold shareholders will receive 2.52 Bitfarms shares for each Stronghold share they hold. This exchange represents a substantial premium of about 70% over Stronghold’s 90-day volume-weighted average share price on Nasdaq as of August 16. The transaction also involves the assumption of roughly $50 million in debt, reflecting Bitfarms’ commitment to solidifying its operational capabilities.

By acquiring Stronghold, Bitfarms seeks to significantly enhance its mining capacity. Stronghold’s assets include proprietary power generation facilities and connections to local electrical grids, utilizing coal-fired energy to fuel its mining operations. This acquisition not only increases Bitfarms’ access to vital power resources but also strategically positions the company to expand its mining output amid a fiercely competitive market.

Also, read – Bitfarms Unveils Strategic ‘Poison Pill’ Amid Hostile Takeover from Riot Platforms

The backdrop to this acquisition is Riot Platforms’ unsolicited $950 million offer to purchase Bitfarms, an overture that Bitfarms rebuffed in April. In a defensive countermeasure, Bitfarms implemented a “poison pill” strategy, designed to thwart hostile takeovers, and scheduled a special shareholder meeting on October 29 to confront Riot’s ongoing attempt to overhaul the board by replacing three directors.

Financially, Bitfarms reported revenue of $41.5 million in the second quarter, whereas Stronghold disclosed a net loss of $21.3 million on revenue of $19.1 million for the same period. Riot, one of the global leaders in Bitcoin mining, posted a revenue of $70 million during this timeframe, underscoring the fierce competition in the sector.

This acquisition by Bitfarms takes place amid looming challenges within the crypto mining industry, particularly in light of the recent Bitcoin halving event, which has significantly reduced daily mining rewards. In response, mining companies are increasingly pursuing acquisitions as a strategy to scale operations and mitigate the financial impacts of decreased rewards.

The industry is also witnessing a surge in computational power, or hashrate. Riot disclosed in July that its hashrate soared by 50% between May and June of this year, reaching a formidable 22 exahashes per second (EH/s), a 106% increase compared to the 10.7 EH/s recorded last year. Despite this growth, Riot reported a 19% month-to-month increase in Bitcoin production for June, although this figure remains 45% lower compared to the same period in 2023. As of the latest report, Riot holds 9,334 BTC, highlighting its significant presence in the market.

This acquisition by Bitfarms underscores the intense rivalry and rapid evolution within the Bitcoin mining sector, as companies jockey for position in an increasingly challenging and competitive environment.