A year after public debut, ironSource to merge with US gaming firm in $4b stock deal

Israeli ad tech and app monetization firm to become wholly owned subsidiary of San Francisco-based Unity Software; all-stock transaction to close by end of 2022

Ricky Ben-David is The Times of Israel’s Tech Israel editor and reporter.

An illustration of a gaming console. (Nikolay Evsyukov via iStock by Getty Images)
An illustration of a gaming console. (Nikolay Evsyukov via iStock by Getty Images)

Israeli advertising tech and app monetization firm ironSource is set to merge with US gaming firm Unity Software in an all-stock deal valued at about $4.4 billion, the San Francisco-based gaming company said Wednesday.

The deal comes a year after ironSource went public on the New York Stock Exchange via a merger with Special Purpose Acquisition Company (SPAC) Thoma Bravo Advantage at an implied equity valuation of $11 billion. It was considered the highest-ever valuation for an Israeli firm ahead of a public offering.

As the market took a downturn in 2022, ironSource saw its share drop significantly, and by February, its valuation dropped to approximately $6 billion.

According to the new deal with Unity, founded in Denmark in 2004, ironSource will merge into a wholly-owned subsidiary of the company and current ironSource shareholders will own roughly 26.5% of the combined company.

The transaction is expected to be finalized by the end of 2022.

Founded in 2010, ironSource enables game app developers and cellphone operators to make money on the content they create by displaying ads in the games.

A majority of the top 100 game apps use the ironSource platform, in a mobile gaming market that is expected to top $136 billion in 2022.

Unity, traded on the New York Stock Exchange, creates multi-platform tools and services for gaming developers and creators of interactive content. The merger with ironSource will result in “complementary offerings” on a “unique end-to-end platform that allows creators to create, publish, run, monetize, and grow live games and RT3D [Real Time 3D] content seamlessly,” the companies said.

“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,” said Unity CEO John Riccitiello in a statement on Wednesday. “This is a step further toward realizing our vision of a fully integrated platform that helps creators in every step of their RT3D journey.”

Tomer Bar-Zeev, co-founder and CEO of ironSource, said that “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 combined company “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,” he said.

Bar-Zeev will join Unity’s board of directors and serve as a member of Unity’s executive leadership team, as will other members of the management team, according to the deal.

IronSource employed over 850 people as of March 2021.

Unity’s shares fell by about 13% on Wednesday when, in addition to the ironSource merger, it revised its annual 2022 revenue guidance from $1.35- $1.425 billion to $1.3- $1.35 billion to “reflect our current assessment of macro trends, product launch and competitive dynamic with our monetization business.

Shares for ironSource went up once the deal was announced.

Unity CFO Luis Visoso said the company expects the merger 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 [earnings before interest, taxes, depreciation, and amortization] synergies” by the end of 2024, said Visoso.

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