On2 Technologies has filed an update with the SEC on its proposed merger with Google, hoping to put to rest some key questions.
On2, which makes video compression software, announced Monday that the update includes certain key highlights about the merger and some frequently asked questions.
On2 agreed on August 5for $106.5 million, a deal already approved by its board of directors. The terms call for each share of On2 to be exchanged for 60 cents worth of Google common stock.
With its board anxious for investors to approve the deal, On2 outlined some of the risks to itself and to shareholders if the acquisition is prevented. On2's merger-related expenses have already exceeded $2 million, an amount it would be responsible for if the deal is stopped, it said. With cash reserves of only $2.2 million, such a debt could certainly hurt the company.
Without Google's acquisition, On2 said it might have to grab additional financing to run its business, which could include the sale of certain assets, the issuing of debt, or the release of even more shares.
On2 also admitted that it's had trouble hiring and retaining skilled, qualified employees, a challenge that might be resolved if employees knew they'd be working for a Google instead. Otherwise, if the merger does not move forward, On2 believes its revenues would be impacted by its failure to attract or keep good employees.
To address any conflicts of interest, On2 said none of the members of its board would serve as directors, officers, or employees of Google or receive any money from Google in connection with the merger.
On2 also released an FAQ, hoping to address any concerns on the part of shareholders. Since the Google offer, the board has received no other offers or inquiries from other firms about an acquisition, the company said. The FAQ also goes into great detail about On2's board and key executives and their involvement in the merger.
On2's board has set a special meeting for December 18 for shareholders to vote on the deal, and is urging them to approve it. Proxy cards have also been sent out. If the majority of stockholders okay the merger and all other conditions are met, then it should become effective within two days after the meeting, said On2. Google has said it plans to make On2's technology part of its own Web platform.
The merger initially triggered some On2 shareholders toagainst the company in August, alleging that the deal undervalued On2 and that certain provisions prevented On2's board from considering other offers. But those suits were settled on October 26, though are currently awaiting final approval by the court.
Under terms of a memorandum of understanding in the settlement, On2 agreed to provide additional disclosures in its final proxy statement and prospectus. However, On2 said the settlement implied no wrongdoing on its part, there was no monetary damage, and the company would have released the same information in its proxy statement regardless of the lawsuits.