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Google Buys Video Compressor On2 for $106.5 Million in Stock

MOUNTAINVIEW, CALIF. Google announced its intention this week to buy On2 Technologies, a video compressor based in Clifton Park, N.Y. The deal is valued at $106.5 million, with each share of On2 converted into 60 cents worth of Class A Google (NASDAQ: GOOG) shares. Google was trading at $450.00 mid-day; On2 (AMEX: ONT) was trading at 58 cents, up from 38 cents on news of the deal.

The number Class A Google shares going to On2 stockholders will be determined by dividing 60 cents a share by the volume-weighted average trading price of a Google share during the 20-day period before On2 shareholders vote on the merger. The 60-cent price represented a 62 percent premium over On2’s average share price over the last six months. The transaction is expected to close in the fourth quarter.

On2’s codecs are geared most toward PCs and handheld communications devices. Users include Adobe, Move Networks, Sony, Brightcove, Sun Microsystems, Skype and Nokia among others.
-- Deborah D. McAdams