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Unity Software Inc will buy Weta Digital, a visual effects (VFX) studio known for its work in movies such as "Godzilla vs. Kong" and "Avatar" in a US$1.63 billion cash-and-stock deal, the companies said on Tuesday.

The deal would help Unity, which makes software for video games and animation, tap into Weta Digital's technology and talent to develop VFX tools and focus on metaverse opportunities.

Weta Digital was founded by film director Peter Jackson of "The Lord of the Rings" fame and has won several Academy and BAFTA Awards. It is known for its animated characters such as Gollum and Caesar from "Planet of the Apes".

Unity, which made the software behind the popular mobile phone game Temple Run, will roll out tools for artists and developers across a number of industries, including film and gaming.

"This is where the real opportunity lies. This acquisition is all about building out the platform that will be at the center of the metaverse," D.A. Davidson & Co analyst Franco Granda said.

Metaverse, a buzz word in the tech field after Facebook said it would shift its focus, connects users through augmented and virtual reality and may require artists to work with new tools to build realistic projects.

Weta Digital's Academy Award-winning VFX team will remain a standalone entity known as WetaFX, and is expected to become Unity's largest customer in the media and entertainment space,
the companies said.

Weta FX will license back the technologies and tools from Unity, sign an annual agreement worth US$50 million and a contract for commercial services, they added.

Shares of Unity, which have gained about 12 percent so far this year, slumped 8 percent in extended trading. (Reuters)

Unity to buy 'The Lord of the Rings' VFX studio Weta Digital in US$1.63 bln deal