AppLovin Offers To Buy Unity Video Game Software In A Deal Worth $17.5 Billion

People play “Pokemon GO” on a Pokequan GoBoat Adventure Cruise on the Occoquan River in the small town of Occoquan, Virginia, US, August 14, 2016. REUTERS / Sait Serkan Gurbuz

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Aug 9 (Reuters) – Game software company AppLovin Corp (APP.O) It made a bid on Tuesday to buy its counterpart Unity Software Inc (United nations) In a $17.54 billion all-share deal, it threatens to derail Unity’s announced plan to acquire AppLovin’s smaller rival IronSource.

AppLovin offered $58.85 per share of Unity stock, which is an 18% premium to Unity’s closing price on Monday. The unit will own 55% of the combined company’s outstanding shares, which is approximately 49% of the voting rights.

Sources familiar with the matter told Reuters that AppLovin has hired consultants to prepare an offer after the unit said last month that it would buy IronSource in an all-share deal worth $4.4 billion. Unity’s board would have to terminate the IronSource deal if it wanted to pursue a group with AppLovin, according to the proposal.

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Under the proposed deal, Unity CEO John Riccitiello will become CEO of the combined business, while AppLovin CEO Adam Foroughi will take over as Chief Operating Officer.

The unit said its board of directors would evaluate the bid. The company reported $297 million in quarterly revenue on Tuesday, up 9% year-over-year, while its operating losses widened. The stock fell 2.68% after the market closed.

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Both companies make software used to design video games. Game industry programs have also expanded to include new technologies such as the so-called metaverse or immersive virtual worlds.

Unity has been used to build some of the most played games like “Call of Duty: Mobile” and “Pokemon Go”, while AppLovin provides help for developers to grow and monetize their apps.

AppLovin’s offering comes as game developers and console makers warn of a slowdown in the sector as decades of high inflation and the easing of COVID-19 restrictions have led players to choose outdoor activities. The company lowered its sales guidance on Tuesday.

“The proposed unit price for Unity appears to be well below its intrinsic value, and we expect Unity to reject it for this reason,” wrote Michael Pachter, analyst at Wedbush Securities. “We believe interference with the acquisition of IronSource is problematic, and will result in the Unity Board of Directors being very cautious before approving the direct sale.”

Shares of Palo Alto, California-based AppLovin, which went public last year, fell 10.29% Tuesday. ironSource shares fell 11.21%. IronSource could receive $150 million in termination fees if the unit decides to walk away, according to the merger agreement.

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Additional reporting by Eva Matthews and Nivedita Balu in Bengaluru and Crystal Ho in New York; Editing by Sumyadb Chakrabarti, Mike Harrison and David Gregorio

Our criteria: Thomson Reuters Trust Principles.

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