The merger between the American company was completed Unity to the Israeli technology company Iron Sources , which both companies reported last July. Iron Source developed a platform designed for game and mobile application developers, and Unity developed a 3D software environment for creating computer games.
● The meetings in San Francisco and the cancellation penalty: the document that reveals what the Iron Source merger will look like
● Tower at a 24% discount on the sale price to Intel: opportunity or risk?
● Shortists and the absence of commodities: What provides the fuel that drives SPAC stocks | Surgery
The transaction in which Unity merges with Iron Source is done in shares, and as part of it, for each Iron Source share, 0.1089 Unity shares will be received. At the time of the original report Unity was valued at $4.4 billion to Iron Source (based on a price of $4.33 per share), a 74% premium over the average share price in the month prior to the announcement. As of today, it is a price of $2.75 per Iron Source share, which reflects the company’s value of just over $2.9 billion fully diluted.
Let’s recall that Iron Source merged into a SPAC company and began trading on Wall Street in June 2021, according to a market value of 11.1 billion dollars. With this, Iron Source became the Israeli company with the highest value among those merged with SPAC companies at that time. It is now being sold at a price that is 74% lower than the value at which it entered Wall Street.
“We are happy to welcome Iron Source to the Unity family and take another step closer to our goal of being the world’s leading platform for creators,” said Unity CEO John Riccitello. “Together, we offer a complete ecosystem for developers to achieve their goals.”
Tomer Bar-Zev, CEO and one of the founders of Iron Source, said: “The driving force behind this merger that will change the industry is to create more value for developers throughout the development journey. We are excited about the road ahead.”
Upon completion of the merger, Unity Bar-Zev will join the board of directors, as well as directors from Iron Source Shlomo Doberat (Viola Fund) and David Kutzman (co-CEO of Outbrain). Iron Source shareholders will own approximately 27% of the merged company.
Difficulties on the way to completing the merger
We will recall that the merger deal encountered difficulties, when AppLovin, a competitor of Iron Source, submitted a merger proposal with Unity shortly after the deal was reported. AppLovin proposed that in the merger with Unity, Unity shareholders would own 55% of the merged company, but presented a condition that was the cancellation of the Iron Source deal. Despite this, the managements of Iron Source and Unity decided to stick to the original deal between them, and Unity’s board of directors determined that the AppLovin offer is not considered superior to the Iron Source deal (as defined in the merger agreement) and this on a financial and strategic basis, and rejected the offer.
At the end of August, the companies detailed the sequence of events leading up to the merger, as part of summonses to shareholders’ meetings to approve the merger. According to the report, last March Bar-Zev came to a meeting at the Unity headquarters in San Francisco, to discuss with the vice president about possible collaborations between the companies. Later, company executives met at a gaming conference in San Francisco and continued to discuss the issue. In April, the idea of a potential business combination between the two companies already came up, but prices and value have not yet been discussed. About another month later, the due diligence process officially began, and Unity executives, including CEO Ricchitello, arrived for meetings at the Iron Source headquarters in Tel Aviv.
The deal was signed as mentioned in July. The companies stated at the time that the merger would create a company with an annual rate of adjusted EBITDA (earnings excluding interest, tax, depreciation and amortization) of $1 billion at the end of 2024, as well as synergies of $300 million per year within three years. Jefferies Investment Bank served as Iron Source’s financial advisor in the transaction.
Revenues and net profit are on the rise
Iron Source was founded in 2010 by Bar-Zev and the brothers Roy, Eyal and Iti Millard, and other founders of the company joined it in the purchases it made – Omer Kaplan, Gil Shoham, Eric Cherniak, Arnon Harish and Tamir Karmi. After it was merged with the SPAC company and started trading, the company acquired Tapjoy from the USA for 400 million dollars, and later Bidalgo from Israel.
The last reports published by Iron Source were for the second quarter, in which it recorded revenues of 183 million dollars, a growth of 35% compared to the corresponding quarter. GAAP net income increased by 27.2% to $12.7 million, and the company posted quarterly EBITDA (earnings excluding interest, tax, depreciation and amortization) of $56 million, an increase of 22%. In the first half of the year, revenues grew by 46% to $372 million, and net profit increased by 31% to $26.5 million. At the end of the first half, Iron Source’s coffers were 387 million dollars.