- Unity (NYSE: U) and ironSource, (NYSE: IS) announced that they are merging. This is why.
Unity (NYSE: U) – the world’s leading platform for creating and operating interactive, real-time 3D (RT3D) content – and ironSource, (NYSE: IS) – a leading business platform that empowers mobile content creators to turn their apps into scalable and successful businesses – announced that they have entered into a definitive agreement under which ironSource will merge into a wholly-owned subsidiary of Unity via an all-stock deal, where each ordinary share of ironSource will be exchanged for 0.1089 shares of Unity common stock. And once the deal is closed, current Unity stockholders will own approximately 73.5% and current ironSource shareholders will own approximately 26.5% of the combined company. The companies’ complementary offerings create a unique end-to-end platform that allows creators to create, publish, run, monetize, and grow live games and RT3D content seamlessly.
The end-to-end platform synergy from the combination of the companies is going to enhance Unity’s offerings for creators of all sizes. And together with ironSource, Unity will transform and streamline how live games, RT3D apps and services are made by turning today’s linear creation and growth process into a deeply connected and interactive one. By integrating creation and growth more tightly, creators will be able to leverage data on audience feedback to improve content from the earliest stage in the creation process, and throughout the content lifecycle. And this will unlock a flywheel where data from growth feeds improvements in content which in turn drives more business success for the content or app.
This deal will bring together the Unity game engine and editor, Unity Ads, and the rest of Unity Gaming Services (UGS) with ironSource’s best-in-class mediation and publishing platforms, giving developers a seamless and interoperable way to create, grow, and monetize their creations across their lifecycle. And in the near term, ironSource’s mediation platform will utilize the combined strength of the two companies’ ad networks to deliver increased user reach and data scale, and provide an increased return on ad spend to advertisers. Telcos will also benefit from the combination of Unity and ironSource, which will provide them with enhanced opportunities to leverage interactive gaming and RT3D experiences on-device.
Along with delivering benefits for creators, this deal also provides significant benefits to shareholders. And the combined company is expected to generate a run rate of $1 billion in Adjusted EBITDA by the end of 2024.
In connection with the merger, Unity’s Board of Directors also authorized a 24-month share buyback program of up to $2.5 billion, effective upon closing of the merger, which is expected to reduce dilution caused by the transaction.
Silver Lake and Sequoia have fully committed to purchasing an aggregate of $1 billion in convertible notes from Unity at closing, demonstrating their belief in the value creation potential of the merger. And the convertible notes to be issued to Silver Lake and Sequoia are due in 2027 and bear an interest rate of 2% per annum. The conversion price is $48.89 per share.
Upon closing of the merger, Tomer Bar-Zeev will join Unity’s Board of Directors and serve as a key member of Unity’s executive leadership team. And 2 additional ironSource Directors will join the Unity Board of Directors upon closing of the transaction. Bar-Zeev and other members of ironSource’s management team, who will also assume leadership roles in the combined company, have an established track record of building a profitable, high-growth leader in the global app economy. ironSource’s headquarters in Israel will serve as an additional global hub for Unity.
“We believe the world is a better place with more successful creators in it. The combination of Unity and ironSource better supports creators of all sizes by giving them all the tools they need to create and grow successful apps in gaming and other consumer-facing verticals like e-commerce. This is a step further toward realizing our vision of a fully integrated platform that helps creators in every step of their RT3D journey. We look forward to welcoming Tomer Bar-Zeev, the CEO of ironSource, and the rest of ironSource’s talented team into the Unity family.”
— John Riccitiello, CEO of Unity
“To succeed today, creators need an extensive set of solutions and products working in concert to power amazing user experiences and sustainable business growth. The combination of Unity and ironSource brings together every product needed to power that flywheel of growth, in a differentiated platform positioned to lead our category and beyond. We couldn’t be more excited about our shared mission to remove obstacles for creators to grow.”
— Tomer Bar-Zeev, CEO of ironSource
“Beyond our platform, we expect the combination of our business with ironSource to transform Unity’s financial profile to that of a highly profitable and free cash flow positive company. We expect to generate $300 million in annual EBITDA synergies by year three.”
— Luis Visoso, CFO, Unity
Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.