CleanSpark and GRIID Infrastructure Merger: Key Details and What It Means for Stakeholders (GRDI, CLSK)

Adam Mitchell
Oct 27, 2024
5 min read

*Update, October 28 - The merger has been approved by shareholders. Shares of GRDI are currently scheduled to be delisted from Nasdaq after the close of extended hours trading on October 30th. The exchange ratio is set to 0.071 shares of CLSK for every share of GRDI owned.

The recently announced merger between CleanSpark, Inc. (CLSK) and GRIID Infrastructure (GRDI) Inc. promises to be a strategic alignment for both companies, aimed at enhancing CleanSpark's infrastructure capacity and strengthening its position in the energy and technology sectors. On June 26, 2024, both parties signed a merger agreement, setting the stage for GRIID to become a wholly-owned subsidiary of CleanSpark. This merger plan, subject to a vote by GRIID stockholders, will be decided at a special meeting scheduled for October 28, 2024.

This article unpacks the merger’s details, including stockholder implications, exchange ratios, voting requirements, and potential benefits of the transaction.

The Merger Structure and Key Terms

Under the terms of the merger agreement, CleanSpark’s subsidiary, Tron Merger Sub, Inc., will merge into GRIID, with GRIID emerging as a subsidiary of CleanSpark. Key elements of the agreement include:

Aggregate Merger Consideration: The total merger consideration is set at $155 million, adjusted for GRIID’s liabilities at closing, net of cash. Up to $5 million in severance obligations may also factor into the calculations.
Exchange Ratio: GRIID stockholders will receive CleanSpark common stock in exchange for their GRIID shares. The specific exchange ratio will be determined by dividing the total merger consideration by the aggregate number of GRIID common stock shares outstanding at the time of closing.
Stock Ownership Post-Merger: CleanSpark’s existing shareholders are expected to own approximately 98% of the combined entity, with GRIID stockholders holding around 2% of the company, though this ratio is subject to change based on final calculations.

Business Operations, Before & After the Combination

GRIID Infrastructure Inc. is a digital infrastructure provider focused on developing and managing data centers designed for blockchain and cryptocurrency mining. With an emphasis on sustainable energy, GRIID leverages energy-efficient hardware and renewable energy sources to operate high-capacity data centers optimized for mining cryptocurrency at a competitive cost. As the cryptocurrency industry evolves, GRIID has established itself as a key player by building scalable solutions and maintaining a low-cost operational model in a sector often challenged by energy demands.

CleanSpark, Inc. is a technology company specializing in energy software and control technology solutions that enhance energy efficiency, resiliency, and sustainability. CleanSpark’s primary offerings include energy storage solutions, microgrid controls, and advanced energy analytics designed to help businesses and communities reduce energy costs and rely more on renewable sources. Recently, CleanSpark has extended its expertise to the cryptocurrency mining sector, where it applies its energy optimization solutions to reduce the power costs and carbon footprint associated with digital mining operations.

Following the merger, the combined entity will benefit from CleanSpark’s advanced energy technology and GRIID’s established infrastructure for high-volume data processing. GRIID’s data centers will integrate CleanSpark’s energy management technology, improving efficiency and cost-effectiveness in cryptocurrency mining. By combining CleanSpark's innovative energy solutions with GRIID's infrastructure, the merged entity aims to become a leader in energy-optimized digital mining. For CleanSpark’s investors, the transaction offers a pathway into the growing digital asset sector with a sustainability focus, while GRIID’s stakeholders gain access to CleanSpark’s technological resources, strengthening the company’s long-term stability and growth trajectory.

Financial Implications for GRIID Stockholders

The value each GRIID stockholder will receive in CleanSpark stock depends on several financial factors at the time of the merger’s closing:

Outstanding Liabilities: GRIID’s liabilities, including debt and severance obligations, will be subtracted from the aggregate consideration, potentially reducing the value each stockholder receives.
Estimated Exchange Ratio: As of the merger agreement date, the anticipated exchange ratio is approximately 0.071, based on assumed liabilities, cash on hand, and outstanding shares. However, the final exchange ratio may differ due to adjustments at closing.

Conditions for the Merger’s Completion

The merger’s successful completion hinges on several conditions, primarily the approval of GRIID’s stockholders. Specific voting thresholds include:

Stockholder Vote Requirement: The merger must receive a majority vote from GRIID’s stockholders, excluding shares held by GRIID Holdings LLC and James D. Kelly III. Stockholders representing about 73% of GRIID’s outstanding shares have already agreed to support the merger, making approval likely barring any last-minute changes.
Special Meeting Date: GRIID will hold a virtual special meeting on October 28, 2024, where stockholders will cast their votes on the merger proposal. Stockholders can vote in advance by proxy or attend the virtual meeting to vote directly.

Board Recommendations and Governance

The merger agreement has received full support from GRIID’s board of directors, following a recommendation from a special committee of independent directors. The committee assessed the merger's fairness to stockholders, considering:

Benefits to GRIID Stockholders: The special committee found the transaction fair and in the best interest of stockholders, given the strategic and financial benefits CleanSpark offers as a larger and more diversified entity.
Alignment with Long-Term Goals: Both CleanSpark and GRIID expect the merger to improve financial flexibility and provide GRIID access to CleanSpark’s technological and operational resources.

Stockholder Guidance for the Special Meeting

All eligible GRIID stockholders, based on the September 20, 2024, record date, are encouraged to vote at the special meeting, either by submitting a proxy in advance or by attending the virtual meeting.

Voting Process

Proxy Submission: Stockholders can submit their proxy online, by phone, or by mailing the proxy card provided. Voting in advance ensures representation at the meeting and helps achieve the quorum needed for the vote to proceed.
Virtual Meeting Attendance: For those who wish to vote live, the virtual meeting link (https://www.cstproxy.com/griid/sm2024) provides secure access. Proxy holders can also attend on behalf of stockholders if designated in advance.

Potential Risks and Considerations

While the merger offers GRIID the potential for enhanced stability and CleanSpark’s backing, stockholders should be mindful of several considerations:

Fluctuations in CleanSpark Stock: Because GRIID stockholders will receive CleanSpark stock, the value of their investment will depend on CleanSpark’s stock performance, which may be subject to market volatility.
Liability Adjustments: The final consideration for GRIID stockholders is sensitive to adjustments based on GRIID’s liabilities at the time of closing, which could influence the exchange ratio.

Final Thoughts

The merger between CleanSpark and GRIID Infrastructure presents a noteworthy opportunity for both companies to expand their footprint and increase shareholder value through combined resources and capabilities. GRIID’s stockholders stand to benefit from CleanSpark’s market presence, while CleanSpark will leverage GRIID’s infrastructure strengths.

As the October 28 special meeting nears, GRIID stockholders have a valuable opportunity to weigh in on a transaction poised to reshape the future of both companies. Whether participating through a proxy or attending the virtual meeting, every stockholder's vote will help steer the direction of this transformative merger.

For additional information, stockholders are encouraged to review the full proxy statement available on GRIID and CleanSpark's respective websites.

Frequently Asked Questions (FAQs)

What will happen to GRIID stock once the merger is complete?

After the merger, GRIID stock will no longer trade independently as it will become a subsidiary of CleanSpark. GRIID stockholders will instead hold shares in CleanSpark based on the exchange ratio.

How will the merger impact CleanSpark’s stockholders?

CleanSpark stockholders will retain approximately 98% ownership in the merged entity, preserving their investment while expanding CleanSpark’s infrastructure and market reach through the merger.

What if I hold GRIID shares through a broker?

Stockholders with shares held by a broker or financial institution should follow their broker’s instructions for proxy voting. Brokers generally provide a voting instruction form to facilitate the process.

Are there any tax implications for GRIID stockholders?

U.S. federal tax implications are outlined in the merger agreement. Stockholders are encouraged to consult their tax advisors to understand potential tax consequences based on their individual circumstances.