Shares of mobile technology company AppLovin Corporation (APP) are down more than 9% Tuesday morning after the company said it has submitted a merger proposal to the Board of Directors of video game software development company Unity Software Inc. (U).
The all-stock merger consideration would value Unity at $58.85 per share, 18% premium to the closing price as on August 8. The enterprise value of the deal is estimated at $20 billion.
As per the terms of the non-binding proposal, each Unity stock would be exchanged for 1.152 shares of AppLovin Class A voting common stock and 0.314 shares of AppLovin Class C non-voting common stock.
"AppLovin estimates this combination will create over $700 million of Adjusted EBITDA from synergies in 2025E, with a minimum of $500 million in 2024E," the company said.
Looking forward, AppLovin has slashed its full-year sales outlook to the range of $2.840 billion-$3.140 billion from previous outlook of $3.140 billion-$3.440 billion. Analysts on average polled by Thomson Reuters expect the company to report sales of $3.3 billion.
"We believe that together, AppLovin and Unity create a market leading business that has tremendous growth potential that would generate an estimated run-rate Adjusted EBITDA of over $3 billion by the end of 2024 and would be in the best interest of shareholders of both companies," said Adam Foroughi, AppLovin CEO.
APP is at $36.13 currently. It has traded in the range of $27.04-$116.09 in the past 52 weeks.
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