Consolidation is getting underway in the bitcoin mining space. Hut 8 Mining (TSX: HUT) has entered into a definitive agreement with US Bitcoin Corp to combine operations in what is referred to as an all-stock merger of equals.
With the transaction being branded as a merger of equals, Hut 8 shareholders will receive 0.2 shares of the New Hut common stock, for each share held. USBTC shareholders meanwhile will receive 0.6716 of a share of New Hut for each common share held. The result, is that the two entities are expected to each account for roughly 50% ownership of the resulting company.
On a combined basis the resulting entity, to be referred to as Hut 8 Corp, will have 825 MW of gross energy via six sites, with the company focused on self-mining, hosting infrastructure, and managed infrastructure operations.
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In terms of mining capacity, the entity will have a hash rate of 4.6 EH/s, with self-mining operations based in Alberta, New York, and Texas. 244 MW of its energy capacity is slated to be devoted to bitcoin mining.
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Hosting infrastructure meanwhile will account for 220 MW of the firms capacity, which will be hosted at its King Mountain, Texas site under a joint venture arrangement.
The company is looking to lean heavily into an ESG-angle despite the power consumption of crypto, with the firm highlighting it has 680 MW worth of operations powered from a mix of energy sources that includes renewables.
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The transaction is also being used as a means for the company to abandon its “HODL” strategy.
“This Transaction has given us the opportunity to leverage the significant, unencumbered Bitcoin stack we have HODLed to date. During the interim period, we plan to cover our operating costs through a combination of selling the Bitcoin we mine, selling from our stack and/or exploring various debt options, as agreed under the terms of the Business Combination Agreement. Upon a successful close of the Transaction, we will take the opportunity to carefully review and determine our go-forward treasury strategy,” commented CEO Jaime Leverton.
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The company has indicated that the deal is expected to provide the firm with a balance sheet that has “greater financial stability through market cycles,” while also enabling greater diversification of their operations.
The transaction is subject to shareholders of Hut 8 Mining approving the transaction, as well as regulatory and court approvals. A termination fee is also in place, which would see Hut 8 required to pay a termination fee of US$10 million in certain circumstances.
Closing of the transaction is slated to occur sometime after the second quarter of 2023. The company is expected to remain trading on both the TSX and the Nasdaq.
Hut 8 Mining last traded at $3.19 on the TSX.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
