On2 Technologies’ shareholders OK merger with Google

Shareholders for On2 Technologies voted to approve a merger with Internet search giant Google Wednes

Shareholders for On2 Technologies voted to approve a merger with Internet search giant Google Wednesday afternoon. The transaction, at more than $130 million, is Google’s first involving a public company.

Not all were in favor.

At a shareholders meeting at Comfort Suites in Clifton Park, Scotia resident John Rack voted no.

“I’m still making money but I think I should be doing a lot better,” said Rack, an On2 stockholder since 2007 when the stock price was $1.06.

Rack described the whole experience as a rollercoaster ride, but said he bought the stock because he liked On2’s concept — technology that provides a faster way for videos to be transmitted and viewed online.

On2 is the maker of advanced video compression technology behind computer and mobile applications as well as software programs like Skype. The company said other customers include Nokia, Infineon, Move Networks, Sony, Brightcove, Mediatek and Sun Microsystems.

The approved deal, which is expected to close Friday, trades each outstanding share of On2 common stock for a thousandth of a share of Google Class A common stock and gives shareholders an additional 15 cents per share in cash.

Rack was among only a handful of shareholders in attendance since most either voted online or by telephone before the meeting.

Robert O’Malley of Clifton Park also expressed displeasure.

O’Malley, an On2 shareholder for more than six years, said the price of On2 stock could have gone up, but as part of the agreement with Google the purchase price of On2’s stock was capped at around 60 cents.

CEO Matthew Frost said that the legal costs incurred just to explore the possibility of being acquired — some $2 million alone — would have to be recouped somehow if the deal didn’t go through.

“We’re a tiny company with all the costs of a public company,” Frost said, later mentioning that no counter-offers were made after the original Aug. 4 Google offer. Also, as of Wednesday, the company had $1.7 million in negative operating capital on its balance sheet that it would have to deal with if the Google deal didn’t work out. “That’s one of the risks we face,” Frost said.

Frost said the board of directors wasn’t interested in short-term increases in stock, but the long-term prospects for the company.

News that the deal had received majority vote approval led Niskayuna resident and On2 shareholder Peter Kent to clap his hands and throw a thumbs up gesture as Wednesday’s meeting adjourned.

Kent said in December he purchased more than 100,000 shares hoping to take advantage of stock price differentials, something known as a risk arbitrage in stock trading jargon.

“I was just betting on the merger going through,” he said. “For me, it’s a nice win.”

Frost called the ordeal a long, drawn out process that left shareholders with strong feelings on both sides.

On2’s nearly 40 employees who work in Clifton Park are expected to remain there, Frost said. The rest of On2’s employees are mostly based in Finland. Overall, the company has about 80 employees.

As Google integrates On2’s technology into properties like Google Chat, On2 employees will begin working on Google’s projects, he said. Frost said the company’s keys to success were found in local universities, which provided a fertile ground for the region’s high tech economy.

The acquisition ends a long road for the Internet startup, which during the dot-com bust closed down offices to reduce costs. The company was once based in New York City, but closed its office there and moved to the Capital Region, a place Frost said had ample resources of computer scientists and engineers.

“There’s a lot to be proud of,” he said.

Google shares were up 14 cents in trading at $538.35 by Wednesday night. On2 Technologies shares were trading at 69 cents, up nearly a cent, in after-hours trading.

Categories: Business

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