Unity rejects AppLovin’s $20 billion merger offer

techcrunch.com:

Unity announced this morning that it is committed to its merger with ironSource and will reject AppLovin’s $20 billion proposal.

Last month, the news broke that Unity — a widely-used game engine — would merge with ironSource, a mobile app monetization and distribution company. But the Israeli company’s larger competitor AppLovin submitted an unsolicited takeover bid to Unity with the condition that they terminate their deal with ironSource.

Unity powers thousands of games across consoles, but when it comes to mobile apps, Unity supports popular games like Pokémon Go, Animal Crossing: Pocket Camp, Call of Duty: Mobile and more. Unity CEO John Riccitiello said that he was interested in merging with an app company like ironSource because it would give Unity developers more tools to grow and monetize mobile games. Plus, in the midst of a macroeconomic downturn, M&A can jump-start user growth, especially as valuations drop and venture capital becomes harder to come by. Despite its prevalence in the video game market, Unity is losing money. The company posted a net loss last quarter of $177.6 million, an increase year-over-year from $107.6 million.

How Unity built the world’s most popular game engine

As TechCrunch’s Ingrid Lunden pointed out, both Unity and ironSource are familiar with this M&A playbook. In January, ironSource acquired Tapjoy for $400 million. In the same month, Unity acquired Ziva Dynamics to expand the tools that it offers to games and other interactive developers, for an undisclosed sum.

In AppLovin’s proposal, Unity would have owned 55% of the merged company’s shares, representing 49% of voting rights. But in the agreement with ironSource, the Israel-based company will become a wholly owned subsidiary of Unity.