Google Ups On2 Offer to Roughly $134M

By Clint Boulton  |  Posted 2010-01-07

On2 Technologies shareholders have successfully wrangled more money out of Google's bid for the video compression software maker.

Google and On2 Jan. 7 said they have agreed to amend the terms for Google to buy On2 in a deal valued at roughly $134 million. On2 stockholders in August sued to block the deal for undervaluing the company, among other issues. This suit was settled in October.

Google has sweetened the deal for dissenting shareholders who opposed the deal. As in the original deal, each outstanding share of On2 common stock will receive 0.0010 of a share of Google Class A common stock, but with an additional 15 cents per share in cash, Google said in a statement.

On2's stock closed Wednesday at 59 cents per share. Based on Google's closing share price on Wednesday of $608.26, the new terms boost the bid's value to $133.9 million, up nearly 25 percent from the deal's original value of $106.5 million.

"The revisions to the terms of the merger agreement serve, in part, to address the fact that, since the acquisition was first announced in August 2009, the market value of Google's Class A Common Stock has increased significantly while the value of the acquisition has remained fixed for On2's stockholders," the companies said in a statement.

Google, which will file a supplement to the Nov. 3 definitive proxy statement describing the deal revisions to the merger agreement, said this is its final offer.

Google also said it will mail the same supplement to all On2 common stock holders by Jan. 15, or more than one month before the special meeting for On2 stockholders reconvenes Feb. 17. At this meeting, On2 common stock owners will be asked to consider and vote upon the merger.

On2's board of directors, which twice delayed a shareholder meeting to mull the offer, approved the amendment to the merger agreement and recommends that On2's stockholders approve the amended merger agreement.

While Google and On2 aim to close the deal before the close of the fourth quarter 2009, either party can terminate the deal if it is not struck by March 31. 

Should Google succeed in closing the deal, it is believed the company will use On2's video codecs to compress videos on YouTube, among other video content.

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