John Paczkowski

Recent Posts by John Paczkowski

On2 to Shareholders: Take the Google Stock, You Morons

519FRR4MC5L._SL500_AA280_On2 shareholders outraged over the company’s pending acquisition by Google will soon have a chance to sack the deal. At a special meeting on Dec. 18, the 60-cents-per-share offer will be put to a vote that’s likely to prove quite contentious, thanks to a cadre of On2 shareholders who believe the offer doesn’t reflect fair market value.

Google’s (GOOG) bid represents a 57 percent premium over On2′s share price before the deal was announced on Aug. 5, but these shareholders claim the company and its video compression IP are worth more and argue that its board should have held out for a more lucrative offer. As one said during an August On2 earnings call, “We have the world class technology and we just sold it for just sixty cents.”

While it’s true that On2′s stock once traded as high as $3.99–back in 2007–that hasn’t been the case lately. And much as the company’s dissident shareholders would like to believe that Google’s demand of exclusivity in the negotiations and “no shop” provisions in the merger agreement prevented On2 from receiving competing buyout offers, that doesn’t seem to the case either. As On2 noted in a merger FAQ issued today, no other companies have inquired about a potential acquisition since the Google deal was announced. From that document:

Did the mid-cap sized publicly traded company in the semiconductor industry referenced in the proxy/prospectus that contacted On2 in late June 2009 express any interest in a transaction with On2 after the merger transaction with Google was announced?

No. On2 did, however, receive an email from such company following the announcement of the Google transaction in which company stated the following: “Congratulations on the transaction. Nice premium to market.”

Well, there you go.

Perhaps, then, On2 is not worth more than what Google proposes to pay for it. Obviously that’s the opinion of the company’s Board of Directors, which is literally begging shareholders to vote in favor of the merger. Said the board: “If the proposed merger with Google is not consummated, On2 may be forced to revert to a business model and strategy that are uncertain given On2’s size and limited resources and for which there can be no assurance On2 will ever achieve or sustain profitability.”


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