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Google sweetens On2 acquisition offer

The Internet giant puts an extra 15 cents per On2 share on the table, increasing its offer to a value of about $133.9 million for the video compression company.

Google has announced new, more lucrative terms for its desired acquisition of On2 Technologies, a "final offer" intended to sway reluctant On2 shareholders.

In a Dec. 29 regulatory filing, On2 twice postponed a shareholder meeting to consider the offer--0.001 shares of Google Class A common stock for each share of On2 stock--to give itself more time to persuade shareholders of a deal that the video compression technology company wants to conclude. On Thursday, On2 and Google announced that Google would pay an extra 15 cents in cash per share as well.

On2's stock closed at 59 cents per share Wednesday, valuing the earlier deal at $107.4 million based on Google's closing share price on Wednesday of $608.26. The new cash incentive, worth $26.5 million, increases the offer nearly 25 percent to $133.9 million.

"By increasing the consideration offered to On2's stockholders by an additional $0.15 per share in cash, On2's stockholders will receive additional value for their On2 common stock that Google and On2 believe better reflects the value that On2's stockholders would have received had the acquisition closed closer to the time of its announcement in August 2009," the companies said in a statement. "This increase in the consideration that Google is offering to On2's stockholders constitutes Google's final offer."

On2 shareholders will be able to vote on the acquisition at a February 17 meeting. The company's board has approved the sale to Google. The companies had hoped to complete the acquisition in 2009.

It's not exactly clear what Google sees in On2, a company that licenses "codec" technology for encoding and decoding video data. Google has a strong interest in Web-based video streaming through its popular YouTube site. The company also has been involved in work to build video abilities into Web browsers--including its own Chrome, which today can handle both the H.264 and Ogg Theora video codecs.

Update 7:21 a.m. PST: In morning trading Thursday, On2's share price rose 15 cents, or 26 percent, to 74 cents.