Looks like AppLovin’s attempt to wedding crash Unity’s planned merger with ironSource isn’t going to work.
On Monday, Unity’s board of directors rejected AppLovin’s bid to buy the company and reaffirmed its commitment to merge with ironSource. Read the release.
As a quick refresher: Last week, AppLovin offered to buy Unity for roughly $20 billion if Unity would agree not to buy mobile ad platform ironSource. In July, Unity had announced plans to acquire ironSource in a deal worth roughly $4.4 billion.
AppLovin’s proposal would have required Unity to scrap its previous arrangement with ironSource and pay a hefty breakup fee.
Unity’s board “continues to believe that the ironSource transaction is compelling and will deliver an opportunity to generate long-term value,” said John Riccitiello, Unity’s CEO, in a statement on Monday.
Riccitiello pointed to the value of an “end-to-end platform” that will allow creators to develop, publish, run, monetize and grow their games in one place.
“End-to-end” was also what AppLovin had in mind for its proposed mashup with Unity, including access to more first-party data from Unity’s game creation business to fuel AppLovin’s machine learning-powered recommendation technology.
But that won’t be happening. The heart wants what the heart wants. Or, rather, replace “the heart” with “board members.”
Unity’s board went through a thorough financial and strategic review of AppLovin’s bid, according to a statement, and unanimously decided that it wasn’t a “superior proposal” to what Unity already had in place with ironSource and therefore isn’t in the best interests of Unity’s shareholders.
The board is recommending that Unity’s shareholders vote to uphold the ironSource deal and dismiss AppLovin’s proposal.
Unity says it expects that the combination with ironSource will help deliver a $1 billion run rate by the end of 2024 and $300 million in annual EBITDA synergies in 2025.
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To help finance the merger with ironSource, Silver Lake and Sequoia, Unity’s two largest investors, are still committing to buy $1 billion worth of convertible notes from Unity that will be issued after the deal closes sometime in the fourth quarter. Unity’s board authorized a share buy-back program of up to $2.5 billion to balance out the dilution.
But Unity and ironSource aren’t galloping off into the sunset without any challenges ahead.
Unity still needs to appease developers and game creators who didn’t take kindly to comments Riccitiello made in July during an interview with PocketGamer.biz.
When asked about pushback from developers about introducing more data collection and monetization earlier on in the game development process – which Unity is positioning as one of the main benefits of the merger with ironSource – Riccitiello called developers that don’t embrace that way of doing things “the biggest effing idiots” (although he actually dropped an F-bomb).
Some developers are also disgruntled about ironSource’s checkered past.
One of ironSource’s first-ever products, a wrapper technology for bundling and installing software called InstallCore, was so often co-opted to distribute malware that Microsoft and others eventually ended up blacklisting it. IronSource discontinued InstallCore in 2020, but the whiff remains.
