unity: AppLovin makes USD17.5 billion acquisition offer for video game software developer Unity
AppLovin has offered USD58.85 for each Unity share, which represents a premium of 18 percent to Unity's closing price. Unity will own 55 percent of the combined company's outstanding shares, representing about 49 percent of the voting rights.
AppLovin hired advisors to work out an offer after Unity last month said it would buy ironSource in a USD4.4 billion all-stock transaction, sources familiar with the matter told Reuters. According to the proposal, Unity's board will have to terminate the ironSource deal if it wants to pursue a combination with AppLovin.
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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.
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 help for 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 the easing of COVID-19 restrictions lead gamers to pick outdoor activities. The company lowered its sales guidance on Tuesday.
"The deal comes as a surprise to everybody in the business," said Serkan Toto, founder of game industry consultancy Kantan Games. "It's a USD15 billion company going after a USD15 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 percent while those of Unity rose 1 percent in the morning trading session. Shares of ironSource were down 9.7 percent.
Foroughi said the combined company would have the potential to generate an adjusted operating profit of over USD3 billion by the end of 2024.
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