AppLovin offers to buy Unity Software in an all-stock deal

Mobile gaming and advertising company AppLovin announced Tuesday that it has made an offer to acquire cross-platform game engine Unity Software in an all-stock deal.

AppLovin will offer $58.85 per each Unity share and the enterprise value of the deal is $20 billion. The proposal would see each outstanding share of Unity common stock exchanged for 1.152 shares of AppLovin Class A voting common stock and 0.314 shares of AppLovin Class C non-voting common stock.

Under the terms Unity will own 55% of the outstanding shares of the combined company, representing about 49% of the voting rights. 

AppLovin forecasts the total revenue for 2022 to be between $2.84B and $3.14B, compared to a prior outlook of $3.14B and $3.44B. The company also estimates this combination will create over $700 million of Adjusted EBITDA from synergies in 2025E, with a minimum of $500 million in 2024E.

“We believe that together, AppLovin and Unity create a market leading business that has tremendous growth potential that would generate an estimated run-rate Adjusted EBITDA of over $3 billion by the end of 2024 and would be in the best interest of shareholders of both companies,” said Adam Foroughi, AppLovin CEO. “Over the last decade we have built and operated a leading and innovative company in mobile app marketing and monetization solutions. Unity is one of the world’s leading platforms for helping creators turn their inspirations into real-time 3D content. With the scale that comes from unifying our leading solutions and innovation that would be achieved with the combination of our teams, we expect that game developers would be the biggest beneficiaries as they continue to lead the mobile gaming sector to its next chapter of growth.”

AppLovin proposes that Unity’s CEO John Riccitiello become CEO of the combined business and Adam Foroughi become the COO.

AppLovin said the execution of a definitive merger agreement between AppLovin and Unity would be subject to approval by each company’s Board of Directors, the termination of the proposed acquisition of ironSource, and other customary signing conditions. 

The completion of the transaction would be subject to customary closing conditions, including receipt of required regulatory approvals and approval of AppLovin and Unity shareholders.