ironSource (NYSE:IS) jumped 52% in premarket trading after Unity Software (NYSE:U) agreed to purchase the company in a $4.4 billion deal. Unity fell 6.5% at least partly after reducing its 2022 revenue forecast.
Each ordinary share of Tel Aviv-based ironSource (IS) will be exchanged for 0.1089 shares of Unity (U) common stock, according to a statement. The deal represents a 74% premium to the 30-day average exchange ratio.
Once closed, current Unity (U) stockholders will own approximately 73.5% and current ironSource (IS) shareholders will own approximately 26.5% of the combined company. Silver Lake and Sequoia, the two largest Unity shareholders, committed to investing an aggregate $1 billion in Unity in the form of convertible notes to be issued at closing.
Adtech firm ironSource, which went public through a SPAC deal with technology private equity giant Thoma Bravo just over a year ago, appears to be taking a huge haircut in its sale to Unity as it was originally valued at $11 billion when it went public last year. ironSource (IS) shares have plunged over 80% since going public.
The deal is expected to deliver a run rate of $1 billion in adjusted EBITDA by the end of 2024, and $300 million in annual EBITDA synergies by year three.
The Unity board also authorized a share buyback program of up to $2.5 billion effective upon closing of the transaction. The deal is expected to close during Unity’s 4Q.
ironSource also reaffirmed (IS) 2Q and full-year 2022 guidance provided during its 1Q earnings call. Unity (U) expects 2Q financial results to be slightly higher than the top end of the guidance range provided during its first quarter earnings call. Unity reduced full-year 2022 revenue guidance from $1,350 - $1,425 million to $1,300 - $1,350 million.
Morgan Stanley served as lead financial advisor to Unity. Goldman Sachs also served as financial advisor to Unity.