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AppLovin's deal for Unity complicated by IronSource

Kerry Flynn
Aug 10, 2022
Illustration of a hand with a megaphone coming out from a mobile phone screen.
Illustration: Aïda Amer/Axios

The read so far on AppLovin's unsolicited bid to buy Unity is that it's gonna be a hard road ahead, given Unity's current agreement to merge with ironSource.

Why it matters: These three businesses are the behind-the-scenes technology underpinning the massive global gaming industry. The outcome will dramatically impact each of their futures, and the industry itself.

What the CEO is saying: Unity CEO John Riccitiello noted AppLovin's proposal at the top of Tuesday's earnings call but declined to discuss it. Unity said in a statement that it would review the offer.

Details: AppLovin's proposal puts Riccitiello as CEO of the combined business, while AppLovin CEO Adam Foroughi would become COO. Unity will own 55% of the company. AppLovin, the rest.

  • The offer of $58.85 per share is an 18% premium of Monday's closing price ($49.76) and 48% premium on the closing price of the day before it announced the ironSource deal ($39.76).

Yes, but: Potential concerns for Unity shareholders include receiving only 49% of the voting rights and the $150 million termination fee with ironSource.

What they're saying: The Street, so far, is bearish on AppLovin's gatecrash.

  • Bloomberg Intelligence analyst Mandeep Singh said, "Given its proposed deal for IronSource, we believe it's unlikely for Unity Software to accept a seemingly hostile bid from AppLovin."
  • "We think interference with the ironSource acquisition is problematic, and will cause Unity's board to tread very carefully before agreeing to a sale outright," Wedbush analysts wrote Tuesday. "We do not expect the deal to happen under the proposed terms."

What's next: AppLovin reports its earnings Wednesday after market close and will likely discuss the deal then.

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