Deal: Gaming Giant Unity To Buy Ad-Tech Platform ironSource For $4.4B

  • M&A
  • July 17, 2022
  • 1367
  • 4 minutes read

Unity logo

The latest big acquisition is from the gaming industry. Unity Technologies (NYSE: U), the company behind a popular eponymous cross-platform game development engine, is buying ironSource (NYSE: IS), a well-known platform that enables game developers to monetize their creations through advertisements.

  • It’s an all-stock deal where Unity has agreed to pay 0.1089 shares of its common stock for every ordinary share of ironSource. The agreement values ironSource at $4.4bn, a 74% premium to its 30-day average share price preceding the announcement.

 

  • ironSource represents Unity’s biggest acquisition since its inception. Before now, that record was held by Weta Digital, a developer of visual effects tools that Unity paid $1.6bn for last December. Weta was founded by Peter Jackson, a movie director and producer whose most famous work is the Lord of the Rings trilogy.

United, Unity and ironSource will be a powerhouse providing tools for game developers to create and monetize games. The acquisition represents a strategic way for Unity to shore up its in-game advertising revenue stream. But, it’s not without controversy, given ironSource’s tainted history of being a vector for spreading malware to PC users.

In defense, Unity presses that the malware distribution was the work of “bad actors” abusing ironSource’s tools. Nonetheless, it seems the company’s shareholders aren’t happy, with its shares down 15% since the deal’s announcement. The stock was already down 80% from its 2021 peak before the ensuing drop triggered by the ironSource deal.

  • Unity was one of the most anticipated public market listings of 2020. The company priced its shares at $52 and witnessed its ascent to $75 on the first trading day. By November 2021, it was trading at nearly $200 but has come down hard since that time. Though there has been a general drop in the American stock markets, Unity has been hit exceedingly.

 

  • ironSource has a similar story to Unity but with a shorter time frame. The Israeli company debuted on the stock market last year through a merger with a special-purpose acquisition company (SPAC) that raised $660 million in cash proceeds and valued it at $11bn. It’s now selling for less than half of that valuation, which represents a big loss to investors notwithstanding the $1.4 billion that the company’s major shareholders cashed out as part of the merger.

Alongside the merger, Unity also announced that it’s raising $1bn through the sale of convertible bonds to Silver Lake and Sequoia Capital, two prominent tech-focused investment firms. Furthermore, the company has authorized a 24-month share buyback program of up to $2.5bn upon closing the merger.

If all goes as planned, the deal will close in this year’s fourth quarter. Upon completion, ironSource’s CEO, Tomer Bar-Zeev, and two other directors will get board seats at Unity.

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