Video game development specialist Unity Software Inc. has rejected a $20 billion merger offer from AppLovin Corp., a major provider of mobile advertising software.

Unity announced the decision today. According to the company, its board has unanimously determined that the merger offer is “not in the best interests of Unity shareholders.”

San Francisco-based Unity provides a popular video game engine that enables developers to create video games with less time and effort than the task usually requires. The company also competes in a number of other areas. Unity sells digital advertising software, tools for creating virtual reality applications and other offerings.

Earlier this month, AppLovin made an offer to merge with Unity in a deal that values the latter company at $20 billion. Under the terms of the proposed deal, Unity investors would receive a 55% stake in the combined company as well as 49% of the voting rights.

AppLovin provides cloud services that enable mobile game developers to sell ad space in their apps to brands. The company also offers several other advertising products, as well as related professional services. By acquiring Unity, AppLovin hopes to create an integrated suite of products that developers can use to both create and monetize games.

A few weeks before AppLovin made its merger offer, Unity inked an agreement to acquire AppLovin competitor ironSource Ltd. for $4.4 billion. AppLovin has made the completion of its proposed $20 billion merger with Unity contingent on the cancelation of the ironSource acquisition. 

“The Board continues to believe that the ironSource transaction is compelling and will deliver an opportunity to generate long-term value through the creation of a unique end-to-end platform that allows creators to develop, publish, run, monetize, and grow live games and real-time 3D content seamlessly,” stated Unity President and Chief Executive John Riccitiello. “We remain committed to and enthusiastic about Unity’s agreement with ironSource and the substantial benefits it will create for our shareholders and Unity creators.”

Mobile game developers sell advertising space in their apps to brands through platforms known as ad exchanges. As part of its product portfolio, ironSource provides a cloud service that helps developers optimize how they use ad exchanges to increase app revenue. The company also offers additional advertising tools, including a marketing platform that can be used to encourage app downloads.

Unity believes that combining its video game development engine with ironSource’s game monetization tools could simplify developers’ work. Additionally, Unity expects to realize significant cost savings through the deal. The company expects to generate $300 million in EBITDA, or earnings before interest, taxes, depreciation and amortization, synergies within three years of the deal’s completion. 

Unity is set to close its acquisition of ironSource in the fourth quarter. Upon the deal’s completion, Unity shareholders Silver Lake and Sequoia will purchase a combined $1 billion worth of convertible notes from the company. Additionally, Unity will launch a share buyback program after the deal’s completion through which it intends to purchase up to $2.5 billion in shares over two years.

Unity logged $297 million in revenue during the second quarter ended June 30, a 9% improvement over the same time a year ago. In the same time frame, ironSource generated revenues of $183 million, which represents a 35% year-over-year increase. 

Image: Unity

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