Gaming software company AppLovin on Tuesday made an offer to buy peer Unity Software in a $17.54 billion (roughly Rs. 1,39,600 crore) all-stock deal, looking to tap into growing demand for three-dimensional gaming. Both companies make software used to design video games. Game-making software has also been expanding to new technologies such as the so-called metaverse, or immersive virtual worlds.

Unity’s software has been used to build some of the most-played games such as Call of Duty: Mobile, and Pokémon Go, while AppLovin provides helps developers to grow and monetize their apps.

The enterprise value of the deal is $20 billion (roughly Rs. 1,59,200 crore). AppLovin will offer $58.85 (roughly Rs. 4,700) for each Unity share, which represents a premium of 18 percent to Unity’s Monday closing price.

Shares of Unity rose 7 percent, while those of AppLovin fell 14 percent before the opening bell.

Under the proposed deal, Unity will own 55 percent of the combined company’s outstanding shares, representing about 49 percent of the voting rights.

AppLovin Chief Executive Officer Adam Foroughi said the combined company will have the potential to generate an adjusted operating profit of over $3 billion (roughly Rs. 23,900 crore) by the end of 2024.

“Unity is one of the world’s leading platforms for helping creators turn their inspirations into real-time 3D content,” Foroughi said.

Last week, Reuters reported that Unity was in talks to spin off its China unit to expand in one of the world’s biggest markets for video games.

Palo Alto, California-based AppLovin, backed by KKR and Co went public last year, cashing in on the surge in demand for video games from people staying at home due to the COVID-19 pandemic.

AppLovin’s offer, however, comes as game developers and console makers warn of a slowdown in the sector as decades-high inflation and easing of COVID-19 restrictions lead gamers to pick outdoor activities.

© Thomson Reuters 2022