Google, the web property giant has entered into a definitive agreement with video compression technology firm On2 yesterday to acquire the company for $106.5 million, aiming to strengthen its video sharing platform YouTube and other key areas.
Under the terms of the agreement, each outstanding share of On2 common stock will be converted into $0.60 worth of Google class A common stock in a stock-for-stock transaction.
Google vice president (product management) Sundar Pichai said, "Today video is an essential part of the web experience, and we believe high-quality video compression technology should be a part of the web platform. We are committed to innovation in video quality on the web, and we believe that On2's team and technology will help us further that goal."
The agreed price of $0.60 per share represents a premium of approximately 57 per cent over the closing price of On2 on Tuesday, the last trading day immediately prior to the announcement of the transaction.
The deal, subject to regulatory and On2 shareholders approvals, and other customary conditions, is expected to close in the fourth quarter of 2009.
On2's video compression technologies help transmit video files easily across the Web thereby increasing the transmission volumes. Google may combine it into YouTube, Chrome browser and other key areas.
On2 interim CEO Matt Frost said, "We're thrilled that On2 is joining one of the world's most innovative companies. After intensive review of On2 products, Google confirmed our long-held beliefs as to the quality of our video technologies. This transaction is a testament to the hard work of every On2 employee and the strongest possible endorsement of our products and people.''