By Senad Karaahmetovic
AppLovin (NASDAQ:APP) announced yesterday it doesn’t plan to make a second offer to merge with Unity Software (NYSE:U). The company also withdrew its first offer.
The board of Unity rejected AppLovin’s $20 billion offer made in August.
“Following careful consideration, AppLovin concluded that its path as the independent market leader is better for its stockholders and other stakeholders,” the company said in a statement.
Wall Street analysts are mostly positive on AppLovin’s decision with shares up almost 3% in premarket Tuesday trading.
“We view the announcement positively. We believe it represents one of the more rational paths APP management could take. It prevents APP shareholders from significant dilution and/or drastic organizational changes in an adverse macro environment,” said an analyst from Oppenheimer.
The analyst cut the price target on APP stock to $45 from $65 to reflect strong competition and weakness in the mobile ad market.
A BTIG analyst doesn’t seem surprised by the announcement as “significant incremental ownership concessions would have represented a major departure from the initial idea of a merger of equals.”
A Stifel analyst added:
“This removes the overhang that has weighed on shares of AppLovin as the market anticipated the company to submit a revised proposal. Our sense is that AppLovin ended its pursuit of Unity as it was unwilling to further dilute its shareholders for an asset that they viewed as a “nice to have” rather than a “must have”.”
Unity shares are down over 4%.