Applovin submits bid to buy Unity Software in a deal valued at $20 billion

Shares of video gaming software company Unity Software Inc. U, +3.86% rallied 11.0% in premarket trading, while Applovin Corp.’s stock APP, -12.41% tumbled 10.0%, after Applovin said it submitted and unsolicited bid to buy Unity in an all-stock deal with an enterprise value of $20 billion. Under terms of the deal, marketing software company Applovin said it will exchange 1.152 of its Class A shares and 0.314 of its Class C shares for each Unity share outstanding. Based on recent stock prices, that share exchange bid values Unity shares at $58.85 each, representing an 18.3% premium to Monday’s closing price of $49.76. Applovin said it expects the deal to create more than $700 million in adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) from synergies in 2025. And Applovin said it proposes Unity Chief Executive John Riccitiello become CEO of the combined business. Separately, Applovin affirmed its 2022 guidance for adjusted Ebitda midpoint of $1.2 billion. Year to date, Unity shares have tumbled 65.2% and Applovin’s stock has dropped 57.4%, while the S&P 500 SPX, -0.44% has lost 13.1%.