Acquisition Makes Galaxy Digital the First
Full-Service Financial Platform for Digital Assets
Adding BitGo's Innovative Infrastructure
Solutions to Our Industry-Defining Product Suite
Galaxy to Undergo a Domestication Process on
Intended Path to U.S. Listing Later this Year
All figures are in U.S. Dollars unless otherwise noted
NEW YORK and SAN
FRANCISCO, May 5, 2021 /CNW/ -
Galaxy Digital Holdings Ltd. (TSX: GLXY) ("Galaxy Digital" or the
"Company"), a financial services and investment management
innovator in the digital asset, cryptocurrency, and blockchain
technology sectors, announced today that it has agreed to acquire
BitGo, the leading independent digital assets infrastructure
provider. The acquisition will position Galaxy Digital as a leading
global full-service platform for institutions seeking access to the
crypto economy, offering an unparalleled breadth of
industry-leading products and services at scale.
"The acquisition of BitGo establishes Galaxy Digital as a
one-stop-shop for institutions and significantly accelerates our
mission to institutionalize digital asset ecosystems and blockchain
technology," said Mike Novogratz,
CEO and Founder of Galaxy Digital. "The power of the technology,
solutions, and people we will have as a result of this acquisition
will unlock unique value for our clients and drive long-term growth
for our combined business. We are excited to welcome Mike Belshe and the talented BitGo team to
Galaxy Digital."
BitGo was the first independent regulated custodian,
purpose-built for digital assets. Since its founding in 2013, BitGo
has been a pioneer in developing leading custody and wallet
infrastructure products, financial products including prime
lending, trading, and portfolio management, as well as tax
solutions that mitigate risk and optimize capital efficiency.
Today, it is a leading custody provider with over $40 billion of assets under custody, serving over
150 exchanges and over 400 institutional clients. BitGo processes
over 30 billion monthly transactions, supports the custody of more
than 400 coins and tokens and provides clients with the most
comprehensive insurance available in the market.
BitGo's product suite is complementary to Galaxy Digital's
existing offerings across Asset Management, Trading, Investment
Banking, and Mining. The combined business will be uniquely
positioned to serve the entirety of clients' financial services
needs, whether they are storing assets or transacting. Galaxy
Digital believes being best equipped to meet evolving client needs
will be the defining factor for industry leadership.
"Joining Galaxy Digital represents an exciting new chapter for
our business, as our current clients gain access to a wide set of
financial solutions," said BitGo CEO and Founder, Mike Belshe. "We will now be in a position to
offer our best-in-class digital asset infrastructure capabilities
to significantly more corporate, institutional, and high net worth
investor clients."
Key Transaction Benefits
- Introduces multiple new business lines to Galaxy Digital,
including a regulated client custody solution from BitGo Trust
Companies in South Dakota,
New York, Switzerland and Germany.
- Adds over 400 global net new clients to Galaxy Digital.
- Diversifies the business with greater contribution from
reoccurring revenue that is significantly less correlated with
digital asset prices.
- Institutional-grade levels of security and operational
performance with SOC 1 Type 1 and Soc 2 Type 2 audits.
- Accelerates product innovation and development capabilities by
adding over 50 engineers and key product and security
infrastructure personnel.
- Expands the firm's geographic reach, with the addition of a
West Coast office in San
Francisco, as well as global offices and a significant
international client base.
- Immediate revenue synergy opportunities that, paired with the
other strategic benefits, support the value of the
acquisition.
Transaction Details
Under the terms of the merger agreement, the consideration to
BitGo shareholders will consist of 33.8 million of newly issued
shares of Galaxy Digital common stock and $265 million in cash, subject to certain
adjustments and deferred purchase considerations, implying an
aggregate transaction value of approximately $1.2 billion based on Galaxy Digital's closing
share price on May 4, 2021.
Galaxy Digital will use its balance sheet to fund the cash
consideration, a significant portion of which will be deferred up
to 12 months post-close. Additionally, Galaxy Digital will issue
incremental shares of its common stock to BitGo's shareholders in
exchange for BitGo's net digital assets at close.
BitGo shareholders will own approximately 10% of the pro forma
company. Galaxy Digital to retain substantially all current BitGo
employees and enter into employment agreements with key members of
the management team. Upon closing Mike
Belshe will join as Deputy CEO of Galaxy Digital and will
become a member of the company's Board of Directors.
The transaction has been approved by the boards of directors of
both Galaxy Digital and BitGo. The acquisition is expected to close
in the fourth quarter of 2021, subject to approval by Galaxy
Digital's shareholders of the domestication of Galaxy Digital as a
Delaware corporation and the
internal restructuring described below, as well as certain related
matters and other acquisition-related closing conditions and
regulatory approvals.
Webcast and Conference Call Information
The Company will host a conference call and webcast at
7:00 AM Eastern Time today to discuss
the acquisition. To access the conference call, please dial
1-800-263-0877, Conference ID: 7186572 (US and Canada) and 1-646-828-8143, Conference ID:
7186572 (international). A replay of the call will be
available until June 2, 2021, at
+1-844-512-2921 (US and Canada)
and 1-412-317-6671 (international). Confirmation code for the
replay is 7186572.
A live audio webcast of the conference call will be available at
https://investor.galaxydigital.io or directly at
http://public.viavid.com/index.php?id=144855.
Reorganization and Domestication
Summary
Galaxy Digital also announced that its board of directors has
approved a proposed reorganization and domestication (the
"Reorganization") of Galaxy Digital Holdings Ltd. ("Galaxy
Digital") and Galaxy Digital Holdings LP ("OpCo"). While the
BitGo transaction is conditional on completion of the
Reorganization, the Reorganization is not conditional on the BitGo
transaction being completed.
Under the proposed terms of the Reorganization:
- Galaxy Digital and OpCo will redomicile from the Cayman Islands to Delaware.
- The Galaxy Group's corporate and capital structure will be
reorganized so as to normalize it on the basis of frequently used
Up-C structures in the United
States. The Reorganization will include the following
steps:
-
- Galaxy Digital Pubco Inc., a new Delaware holding company, will be established
and will become the successor public company of Galaxy Digital
("PubCo"), with all outstanding Galaxy Digital ordinary shares
becoming Class A shares of PubCo.
- Mike Novogratz, the CEO and
Founder of Galaxy Digital, who currently controls the general
partner of OpCo, will transfer control of OpCo's general partner to
PubCo.
- PubCo will issue new voting securities to Mike Novogratz and other holders of Class B
Units of OpCo that will entitle them to vote (but not hold any
economic rights) at the PubCo level, as though they had converted
their existing Class B Units of OpCo for shares of PubCo.
- The "variable voting rights" attached to the ordinary shares of
Galaxy Digital that currently restrict the aggregate votes that may
be cast by U.S. shareholders will be eliminated.
- PubCo intends to apply to list its Class A shares on a U.S.
national securities exchange.
Reasons for the Reorganization
The purpose and business reasons for the Reorganization
include:
- Expectation of enhanced shareholder value through increased
access to U.S. capital markets, improved flexibility for future
equity and debt capital market needs, and an increased profile for
Galaxy Digital in the United
States.
- Normalization of Galaxy Digital's corporate and capital
structure.
- Facilitation of the BitGo transaction.
- Alignment of all stakeholders' interests at the PubCo
level.
As a result of the Reorganization, Mike
Novogratz and other holders of Class B Units of OpCo will
receive voting securities of PubCo entitling them to vote
approximately 66% and 5%, respectively, of the total number of
votes held by PubCo securityholders, calculated on a non-fully
diluted basis (and prior to giving effect to the BitGo
Acquisition). This is equal to the number of votes they would have
if they converted their Class B Units into ordinary shares of
Galaxy Digital today (assuming no US resident holder
restrictions).
Special Committee Oversight
While the Reorganization is intended to normalize Galaxy
Digital's corporate and capital structure and align all
stakeholders' interests at the PubCo level, the issuance of a new
voting security (albeit without economic rights) to Mike Novogratz and other current senior officers
of Galaxy Digital who hold Class B Units of OpCo is a "related
party transaction" pursuant to the Canadian Securities
Administrators' Multilateral Instrument 61-101 – Protection of
Minority Securityholders in Special Transactions ("MI
61-101"). As a result, the Galaxy Digital board of directors
formed a special committee of independent directors comprised of
all of the directors of Galaxy Digital, other than Mike Novogratz (the "Special Committee") to
consider the Reorganization. The Special Committee retained
independent counsel and an independent financial advisor. In
consultation with these advisors, the Special Committee acting in
good faith determined that the fair market value of each of (i) the
new voting securities of PubCo to be issued to Mike Novogratz and other interested parties and
(ii) the consideration to be received by PubCo (being the transfer
of control of the general partner of OpCo) are not readily
determinable but in any event are less than 25% of Galaxy Digital's
market capitalization (calculated in accordance with MI
61-101). As a result, Galaxy Digital is exempt from the
requirements to obtain a formal valuation and obtain "majority of
the minority" approval under Sections 5.5(a)(i) and 5.7(a) of MI
61-101.
Shareholder Approval
Under Cayman law, certain aspects of the Reorganization are
required to be approved by not less than two-thirds of the shares
voted at a meeting of holders of ordinary shares of Galaxy
Digital. Notwithstanding that no "majority of the minority"
approval is required under MI 61-101, the Special Committee has
determined to also seek such approval from ordinary shareholders of
Galaxy Digital. The Reorganization is also subject to, among
other things, approval from the TSX and declaration of
effectiveness of a registration statement to be filed by Galaxy
Digital and PubCo with the SEC.
Galaxy Digital will be mailing a management information circular
to its shareholders in connection with the Reorganization, which
will further detail the matters described above and provide an
overview of the review and approval process adopted by the board of
directors and the Special Committee in respect of the
Reorganization.
Important U.S. Tax Information – Action Required by U.S.
Shareholders
Galaxy Digital shareholders who are U.S. taxpayers should be
aware that there may be significant and adverse U.S. federal income
tax consequences of Galaxy Digital's domestication from Cayman to
Delaware unless they make certain
elections on their originally filed U.S. federal income tax returns
for 2020, due on May 17, 2021
(subject to allowable extensions) relating to Galaxy Digital's PFIC
status for 2020 and prior years. These consequences and,
therefore, the need to take action apply to both direct and
indirect holdings of Galaxy Digital shares. These elections are
described in the notice posted by Galaxy Digital in March 2021 on its website at
https://investor.galaxydigital.io/financials/annual-reports/default.aspx.
Before filing their U.S. federal income tax returns for 2020,
direct and indirect Galaxy Digital shareholders who are, or who
have investors who are, U.S. taxpayers are urged to review the
notice and to consult their tax advisors regarding the advisability
of making these elections on their U.S. federal income tax returns
for 2020.
Advisors
Citi is serving as financial advisor to Galaxy Digital on the
acquisition of BitGo. Galaxy Digital's Investment Banking division
also provided assistance on the transaction. Davis Polk & Wardwell LLP, Blake, Cassels
& Graydon LLP and Maples and Calder LLP are serving as legal
advisors to Galaxy Digital.
Qatalyst Partners is serving as financial advisor to BitGo.
Sheppard, Mullin, Richter & Hampton LLP is serving as legal
advisor to BitGo.
Fasken Martineau DuMoulin LLP and Jenner & Block LLP are
serving as legal advisors, and Echelon Capital Markets are acting
as financial advisor, to the Special Committee of Galaxy Digital in
connection with the Reorganization.
About Galaxy Digital
Galaxy Digital (TSX: GLXY) is a diversified financial
services and investment management company in the digital asset,
cryptocurrency, and blockchain technology sectors. Galaxy Digital's
team has extensive experience spanning investing, portfolio
management, capital markets, venture capital, asset management, and
blockchain technology. Galaxy Digital operates in the following
businesses: Trading, Asset Management, Principal Investments,
Investment Banking, and Mining. Galaxy Digital's CEO and Founder
is Mike Novogratz. The Company is headquartered in New
York City, with offices in Chicago, San
Francisco, London, Amsterdam, Tokyo, Hong Kong,
the Cayman Islands (registered office), and New
Jersey.
About BitGo
BitGo is the leader in digital asset financial services,
providing institutional investors with liquidity, custody, and
security solutions. In 2018, it launched BitGo Trust Company, the
first qualified custodian purpose-built for storing digital assets
and established BitGo New York Trust in 2021. In 2020, BitGo
launched Prime Trading and Lending and BitGo Portfolio and Tax,
providing clients with a full-stack solution for digital assets.
BitGo processes over 20% of all global Bitcoin transactions and
supports custody for over 400 coins and tokens. BitGo's customer
base includes the world's largest cryptocurrency exchanges and
institutional investors and spans more than 50 countries. BitGo is
backed by Goldman Sachs, Craft Ventures, Digital Currency Group,
DRW, Galaxy Digital Ventures, Redpoint Ventures, and Valor Equity
Partners.
Disclaimers
The TSX has neither approved nor disapproved the contents of
this press release.
No Offer or Solicitation
This communication shall not constitute a solicitation of a
proxy, consent or authorization with respect to any securities or
in respect of any of the proposed transactions. This communication
is for informational purposes only and shall not constitute an
offer to sell or the solicitation of an offer to buy any securities
or a solicitation of any vote of approval, nor shall there be any
sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to the registration or
qualification under the securities laws of any such
jurisdiction.
Additional Information
In connection with the proposed reorganization and combination,
Galaxy will file a registration statement, including a management
circular/prospectus and an information
statement/prospectus, with the Securities and Exchange
Commission (the "SEC"). GALAXY AND BITGO SHAREHOLDERS ARE
ADVISED TO READ THE MANAGEMENT CIRCULAR/PROSPECTUS AND INFORMATION
STATEMENT/PROSPECTUS, RESPECTIVELY, WHEN SUCH
DOCUMENTS BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION. Shareholders may obtain a free copy of the
registration statement and such other documents (when
available) and any other relevant documents filed with the SEC from
the SEC's website at http://www.sec.gov. Copies of the management
circular/prospectus and an information statement/prospectus can
also be obtained, when available, without charge, from Galaxy's
website at https://investor.galaxydigital.io.
CAUTION ABOUT FORWARD-LOOKING STATEMENTS
The information in this communication may contain
"forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and "forward-looking information" under Canadian
securities laws (collectively, "forward-looking statements"). Our
forward-looking statements include, but are not limited to,
statements regarding our or our management team's expectations,
hopes, beliefs, intentions or strategies regarding the future.
Statements that are not historical facts, including statements
about the pending acquisition, domestication and the related
transactions (the "transactions"), and the parties, perspectives
and expectations, are forward-looking statements. In addition, any
statements that refer to estimates, projections, forecasts or other
characterizations of future events or circumstances, including any
underlying assumptions, are forward-looking statements. The words
"anticipate," "believe," "continue," "could," "estimate," "expect,"
"forecast," "intend," "may," "might," "plan," "possible,"
"potential," "predict," "project," "should," "would" and similar
expressions may identify forward-looking statements, but the
absence of these words does not mean that a statement is not
forward-looking. Forward-looking statements in this presentation
may include, for example, statements about: our ability to complete
the transactions; our expectations around the performance of our
and the target's business; our success in retaining or recruiting,
or changes required in, our officers, key employees or directors
following the transactions; or our financial performance following
the transactions. The forward-looking statements contained in this
communication are based on our current expectations and beliefs
concerning future developments and their potential effects on us
taking into account information currently available to us. There
can be no assurance that future developments affecting us will be
those that we have anticipated. These forward-looking statements
involve a number of risks, uncertainties (some of which are beyond
our control) or other assumptions that may cause actual results or
performance to be materially different from those expressed or
implied by these forward-looking statements. These risks include,
but are not limited to: (1) the occurrence of any event, change or
other circumstances that could result in the failure to consummate
the transactions; (2) the possibility that the terms and conditions
set forth in any definitive agreements with respect to the
transactions may differ materially from the terms and conditions
set forth herein; (3) the outcome of any legal proceedings that may
be instituted following the transactions and any definitive
agreements with respect thereto; (4) the inability to complete the
transactions due to the failure to satisfy conditions to closing in
the definitive agreements with respect to the transactions
including in respect of shareholder and stock exchange approvals
(5) changes to the proposed structure of the transactions that may
be required or appropriate as a result of applicable laws or
regulations or as a condition to obtaining regulatory approval of
the transactions; (6) the ability to meet and maintain listing
standards following the consummation of the transactions; (7) the
risk that the transactions disrupts current plans and operations;
(8) costs related to the transactions; (9) changes in applicable
laws or regulations; (10) the possibility that the combined company
may be adversely affected by other economic, business, and/or
competitive factors; (11) changes or events that impact the
cryptocurrency industry, including potential regulation, that are
out of our control; (12) the risk that our business will not grow
in line with our expectations or continue on its current
trajectory; (13) the possibility that our addressable market is
smaller than we have anticipated and/or that we may not gain share
of it; (14) those other risks contained in the Annual Information
Form for the year ended December 31,
2020 available on the Company's profile at www.sedar.com and
(15) other risks and uncertainties to be indicated from time to
time in filings made with the SEC. Should one or more of these
risks or uncertainties materialize, they could cause our actual
results to differ materially from the forward-looking statements.
We are not undertaking any obligation to update or revise any
forward looking statements whether as a result of new information,
future events or otherwise. You should not take any statement
regarding past trends or activities as a representation that the
trends or activities will continue in the future. Accordingly, you
should not put undue reliance on these statements.
SOURCE Galaxy Digital Holdings Ltd.