AppLovin offers to merge with Unity in a $17.5 billion transaction

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Gaming software company AppLovin Corp made an offer on Tuesday to buy its peer Unity Software Inc in a $17.54 billion all-stock deal. Unity common 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. The deal structure would allow current management of Unity to lead the merged entity.

AppLovin markets software platforms for app developers to help them find customers and bring in revenue. Unity’s 3D software underpins many of the most popular video games.

The proposal may derail Unity’s announced plan to acquire AppLovin’s smaller competitor ironSource  in $4.4 billion all stock transaction. AppLovin’s products will result in duplication if ironSource deal proceeds ahead.

AppLovin has offered $58.85 for each Unity share, which represents a premium of 18% to Unity’s Monday closing price. Unity will own 55% of the combined company’s outstanding shares, representing about 49% of the voting rights.

Under the proposed deal, Unity’s Chief Executive John Riccitiello will become CEO of the combined business, while AppLovin Chief Executive Adam Foroughi will take the role of chief operating officer.

AppLovin has appointed J.P. Morgan as financial advisor and Wilson Sonsini Goodrich & Rosati is serving as AppLovin’s legal advisor.

“We believe that together, AppLovin and Unity create a market leading business that has tremendous growth potential,” said Adam Foroughi, AppLovin CEO, in a press release.