Analyst: Riot won’t acquire Bitfarms, ‘premium is not high enough’

Analysts from H.C. Wainright claim that Riot’s acquisition of Bitfarms will face rejection due to Bitfarm’s board disapproval and insufficient premiums. 

Citing Bitfarm’s board rejection of Riot’s initial offer and the fact the proposed premium is insufficient to attract shareholder approval, analysts at H.C. Wainwright did not give a high probability of success to Riot’s acquisition of Bitfarms.

“The premium is not high enough to compel Bitfarm shareholders to agree to the deal given the deep valuation discount at which shares currently trade, in our view,” the lead analyst Mike Colonnese wrote in a research note. “We also note that this a non-binding proposal and that no definitive agreement has been entered into at this juncture.”

Riot will request a special meeting of Bitfarm’s shareholders at the annual shareholder meeting on Friday to discuss appointing new independent directors. Over the next four months, Riot will aim to nominate new directors to gain board approval for the acquisition, Colonnese also wrote. 

Riot’s board is behind the acquisition and unanimously approved the proposal. The company has the resources to execute the transaction. On April 30, it had over $700M in cash and 8,872 unencumbered Bitcoin (BTC) on the balance sheet. 

Acquisition offer

In a press release on May 28, crypto-mining company Riot announced an acquisition offer to Bitfarms (BITF). The offer was for all BITF shares at $2.3 per share, totaling the acquisition at $950 million.

Riot’s proposal includes a mix of cash and common stock, a structure that could be beneficial for Bitfarms shareholders. This arrangement would allow them to retain ownership of “up to around 17% of the merged company,” potentially providing them with a stake in a larger, more diversified entity.

Prior proposals

In April, Bitfarm rejected Riot’s proposal to acquire the company. Any potential transaction’s final terms and conditions would necessitate approvals from Bitfarm’s and Riot’s respective Boards.

The rejection happened quickly and “without engaging in substantive dialogue.”

“We are deeply concerned that the founders on the Bitfarms board — Nicolas Bonta and Emiliano Grodzki — may not be acting in the best interests of all Bitfarms shareholders,” Riot CEO Jason Les said at the time.

Riot’s current price is $10.34, and it has a “Buy” rating and a price target of $17.00 per share.