By 
AppLovin offers to buy Unity Software for $58.85 a share.
David Paul Morris/Bloomberg
App marketing services company
AppLovin
has proposed to buy video gaming company
Unity Software
in an all-stock transaction valued at $20 billion.
The terms of the deal call for each outstanding share of
U
nity (ticker: U) common stock to be exchanged for 1.152 shares of AppLovin (
APP
) Class A shares and 0.314 Class C shares, meaning Unity shareholders would receive about 55% of the outstanding sharers of the combined company.
“We have received the offer from AppLovin and our Board will thoroughly evaluate it,” a Unity spokesperson said in an emailed statement.
The all-stock merger would value Unity at $58.85 a share with a $20 billion enterprise value, representing an 18% premium to Unity’s closing share price as of Monday.
AppLovin estimates that the combined company could generate more than $7 billion in run-rate revenue by the end of 2024, and more than $3 billion in run-rate adjusted Ebitda, or earnings before interest, taxes, depreciation, and amortization, during the same time period. The company is also expecting to achieve over $700 million in Adjusted Ebitda synergies in 2025.
“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,” said AppLovin CEO Adam Foroughi.
Unity stock rose 2.1% to $50.81 on Tuesday, while AppLovin tumbled 11% to $35.76. Shares of Unity have cratered over the course of the year, down 65% as investor confidence wavers following a series of contentious acquisition decisions. In November, the company said it was acquiring Peter Jackson’s visual effects company Weta Digital for $1.6 billion. A few months later, in July, the company announced plans to merge with app monetization company
IS
) for $$.4 billion. The acquisitions have so far failed to pay off, with the company lowering its financial guidance in both May and July.
Write to Sabrina Escobar at sabrina.escobar@barrons.com
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