Unity rejects $17B hostile takeover bid from AppLovin

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Unity‘s board of directors rejected a $17 billion hostile takeover bid from AppLovin in favor of its pending deal to combine with mobile monetization firm IronSource.

Unity took about six days to reject the unsolicited offer from AppLovin to combine with Unity. AppLovin, a mobile game publisher and monetization firm, made an all-stock offer valuing Unity at $58.85 per share, an 18% premium to its prior closing price.

Unity said the board did a thorough evaluation of the AppLovin proposal with assistance from outside financial and legal advisers and they unanimously determined it was not in the best interests of Unity’s shareholders nor would it be better than Unity’s merger agreement with IronSource.

Unity CEO John Riccitiello said in a statement, “The board continues to believe that the IronSource transaction is compelling and will deliver an opportunity to generate long-term value through the creation of a unique end-to-end platform that allows creators to develop, publish, run, monetize and grow live games and real-time 3D content seamlessly. We remain committed to and enthusiastic about Unity’s agreement with IronSource and the substantial benefits it will create for our shareholders and Unity creators.”

Unity said the IronSource deal would create the industry’s first end-to-end platform to power creators’ success as they build, run, manage, grow and monetize live games and real-time 3D content across their lifecycle. The transaction will drive better economic outcomes for customers by bringing together the Unity game engine and editor, Unity Ads and the rest of Unity Gaming Services (UGS) with ironSource’s best-in-class mediation and publishing platforms, Unity said.

Unity said the combined company is expected to generate a run rate of $1 billion in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) by the end of 2024, and the combination is expected to generate $300 million in annual EBITDA synergies by year three.

In connection with the merger, Unity’s board has authorized a 24-month share buyback program of up to $2.5 billion, effective upon closing of the merger. Unity shareholders Silver Lake and Sequoia have fully committed to purchase an aggregate of $1 billion in convertible notes from Unity at closing, demonstrating their belief in the value creation potential of the merger.

Goldman Sachs and Morgan Stanley are serving as financial advisors to Unity, and Morrison & Foerster, Richard Layton & Finger and Herzog, Fox & Neeman are serving as its legal advisors.

Meanwhile, Israel-based IronSource applauded Unity’s statement.

“Together, Unity and IronSource will be stronger, more profitable and better able to optimize both the Create and Operate sides of the business to deliver everything creators need to succeed,” IronSource said in a statement. “The Board of Directors of ironSource remains committed to completing this strategically and financially compelling combination in the fourth quarter of this year and is confident it will create superior value for shareholders, customers, and employees.”

We’ve asked AppLovin for comment. AppLovin acquired mobile ad firm MoPub from Twitter last year for $1.05 billion and mobile game developer Machine Zone in 2020. Both Unity and AppLovin stock are trading down today.

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