According to Reuters, game software company AppLovin has offered to buy Unity for $17.54 billion, threatening to derail Unity’s deal to acquire smaller rival AppLovin, ironSource.

AppLovin has offered $58.85 for each Unity share, a premium of 18%. Unity will own 55% of the outstanding shares in the combined company, representing around 49% of voting rights.

AppLovin hired consultants to develop the offer after Unity said it would buy ironSource in an all-stock deal for $4.4 billion last month.

Terms of the AppLovin deal

Unity’s board will have to terminate the deal with ironSource if the company wants to merge with AppLovin, are the terms of the offer.

Under the deal, Unity CEO John Riccitiello will become CEO of the combined business. At the same time, AppLovin CEO Adam Foroughi will take over as chief operating officer.

AppLovin, Unity
Adam Foroughi, CEO at AppLovin

Unity’s reaction

Unity said its board would evaluate the offer. Both companies make software used to develop video games. In turn, AppLovin helps developers develop and monetise their applications.

The proposed price for Unity seems well below its intrinsic value, and we expect Unity to reject it. We believe interfering with the ironSource acquisition is problematic and will force Unity’s board to act cautiously before agreeing to the sale.

Michael Pachter, Wedbush Securities analyst

Falling stock

Following this news, AppLovin shares fell 10.29%, and ironSource shares fell 11.21%. ironSource could receive $150 million in severance if Unity decides to leave, according to their merger agreement.