Canadian cryptocurrency exchange CoinSmart Financial Inc. is seeking to enforce a takeover by Toronto-based competitor Coinsquare Ltd., which last week said it wouldn’t carry through with the acquisition.
In late September last year, Coinsquare announced it would buy NEO Exchange-listed CoinSmart for about $29-million in cash and shares. The deal was expected to be finalized by the end of 2022, but Coinsquare announced it was pulling out of the agreement this month, which CoinSmart said took its board and management by surprise.
On Tuesday, CoinSmart said it will “vigorously contest” Coinsquare’s move to terminate the deal, saying its notice “is invalid and without merit.”
In an interview, CoinSmart chief executive officer Justin Hartzman said his company is prepared to take legal action to force Coinsquare to fulfill the agreement.
“The reasons that Coinsquare is giving for walking away are completely bogus,” Mr. Hartzman said. “They were giving us assurances of the deal right up until the last minute. We were talking of final approvals just before this happened.”
But Coinsquare said it has a contractual right to terminate the agreement, which the company claims it validly exercised.
Last week, chief operating officer Eric Richmond said Coinsquare, which is privately held, had conducted standard due diligence and was working with regulators to approve its transaction with CoinSmart. But ultimately, Coinsquare believed the deal wasn’t worth the high costs and risks of acquiring CoinSmart, Mr. Richmond told Tausi Insider.
“We cannot comment on whether CoinSmart was taken by surprise,” Mr. Richmond said. “CoinSmart understood Coinsquare’s concerns that had to be addressed.”
CoinSmart, however, also believes there may be reason to suspect that a potential transaction with another Canadian crypto player, WonderFi Technologies Inc., may have affected its deal with Coinsquare, Mr. Hartzman said.
Late last week, just days after Coinsquare shelved the CoinSmart acquisition, BNN Bloomberg reported that Vancouver-based WonderFi has been in “advanced merger talks” with Coinsquare, citing unnamed sources familiar with the matter. Coinsquare has repeatedly declined to comment on any talks with WonderFi. But WonderFi, which is backed by Kevin O’Leary of Shark Tank, acknowledged that it has “held preliminary discussions with various third parties” about both acquiring another company and itself being acquired. WonderFi declined to say if Coinsquare is one of those companies it is talking with.
“Whatever happens with that WonderFi deal, though, is besides the point,” Mr. Hartzman said. “At the end of the day, Coinsquare is in the wrong here when it comes to our deal with them. We want to see that transaction go through, and after that, we’re willing to mend the bridges with them.”
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