Unity rejects AppLovin’s takeover proposal, sticks with ironSource acquisition

Unity Software’s board of directors on Monday rejected a $17 billion unsolicited takeover bid from AppLovin, keeping it on track to merge with Tel Aviv-based app business platform ironSource. 

Last month, cross-platform game engine Unity announced that it would merge with ironSource to strengthen its technologies for creators of all sizes. Last week, ironSource competitor AppLovin made an offer to buy Unity in an all-stock deal. 

Unity said the board of directors did a thorough financial and strategic evaluation of the unsolicited proposal from AppLovin, with the assistance of outside financial and legal advisors, and has unanimously determined that it is not in the best interests of Unity shareholders and would not reasonably be expected to result in a “Superior Proposal” as defined in Unity’s merger agreement with ironSource.

John Riccitiello, President and Chief Executive Officer of Unity, said, “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.”

The combination with IronSource, which was valued at $4.4 billion at the time of the announcement, is expected to generate a run rate of $1 billion in adjusted earnings before interest, taxes, depreciation and amortization through the end of 2024.

According to the statement, Unity also 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.

ironSource also made a comment on Unity’s rejection of AppLovin’s takeover bid. “Unity’s rejection of AppLovin’s unilateral bid confirms the superior strategic value of the merger with ironSource. 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,” the company said. 

“The deep synergies driving the ironSource-Unity merger extend across the entirety of both companies’ platforms and offerings and underpin our strong financial projections of $1 billion in Adjusted EBITDA by the end of 2024 and $300 million in annual EBITDA synergies by year three.

“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.”