Gaming software company AppLovin on Tuesday made an offer to buy rival Unity Software in a $17.54 billion all-stock deal.
AppLovin aims to tap into demand for three-dimensional (3D) gaming. Both companies make software used to design video games. Game-making software has also been expanding to technologies such as metaverse, or immersive virtual worlds, Reuters news report said.
Unity supplies software to build the most-played games such as Call of Duty: Mobile, and Pokemon Go, while AppLovin provides helps developers to grow and monetize their apps.
The enterprise value of the deal is $20 billion. AppLovin will offer $58.85 for each Unity share, which represents a premium of 18 percent to Unity’s Monday closing price.
Under the proposed deal, Unity will own 55 percent of the combined company’s outstanding shares, representing about 49 percent of the voting rights.
AppLovin Chief Executive Officer Adam Foroughi said the combined company will have the potential to generate an adjusted operating profit of over $3 billion by the end of 2024.
AppLovin estimates this combination will create $700 million of Adjusted EBITDA from synergies in 2025E, with a minimum of $500 million in 2024E. AppLovin is likely to become a $35 billion combined market cap enterprise with market presence with more than $7 billion in run-rate revenue and over $3 billion run-rate Adjusted EBITDA by the end of 2024E.
“Unity is one of the world’s leading platforms for helping creators turn their inspirations into real-time 3D content,” Adam Foroughi said.
Palo Alto, California-based AppLovin, backed by KKR and Co went public last year, cashing in on the surge in demand for video games from people staying at home due to the COVID-19 pandemic.
AppLovin’s offer, however, comes as game developers and console makers warn of a slowdown in the sector as decades-high inflation and easing of cOVID-19 restrictions lead gamers to pick outdoor activities.