AppLovin Offers To Buy Video Game Software Maker Unity In $17.5 Billion Deal
Gaming software company AppLovin Corp made an offer on Tuesday to buy its peer Unity Software Inc in a $17.54 billion all-stock deal, threatening to derail Unity's announced plan to acquire AppLovin's smaller competitor ironSource.
AppLovin has offered $58.85 for each Unity share, which represents a premium of 18% to Unity's Monday closing price. Unity will own 55% of the combined company's outstanding shares, representing about 49% of the voting rights.
AppLovin hired advisors to work out an offer after Unity last month said it would buy ironSource in a $4.4 billion all-stock transaction, sources familiar with the matter told Reuters. Unity's board will have to terminate the ironSource deal if it wants to pursue a combination with AppLovin, according to the proposal.
Under the proposed deal, Unity's Chief Executive John Riccitiello will become CEO of the combined business, while AppLovin Chief Executive Adam Foroughi will take the role of chief operating officer.
Unity said its board would evaluate the offer. The company is slated to report its earnings after the bell on Tuesday.
Both companies make software used to design video games. Game-making software has also been expanding to new technologies such as the so-called metaverse, or immersive virtual worlds.
Unity's software has been used to build some of the most-played games such as "Call of Duty: Mobile," and "Pokemon Go", while AppLovin provides helps developers to grow and monetize their apps.
AppLovin's offer comes as game developers and console makers warn of a slowdown in the sector as decades-high inflation and easing of COVID-19 restrictions lead gamers to pick outdoor activities. The company lowered its sales guidance on Tuesday.
"The deal comes as surprise to everybody in the business," said Serkan Toto, founder of game industry consultancy Kantan Games. "It's a $15 billion company going after a $15 billion company. It's a desperate attempt to consolidate and the chances of this deal happening are very slim."
Shares of Palo Alto, California-based AppLovin, which went public last year, fell 9.9% while those of Unity rose 1% in the morning trading session. Shares of ironSource were down 9.7%.
Foroughi said the combined company will have the potential to generate an adjusted operating profit of over $3 billion by the end of 2024.
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