Google has reached an agreement to buy video compression technology vendor On2 Technologies in a stock deal worth about $US106.5 million, the companies announced.
Each outstanding share of On2 common stock will be converted into $US0.60 worth of Google class A common stock in the transaction, the companies said.
On2 offers video compression technologies used in Adobe Flash Player, VoIP (voice over Internet Protocol), mobile video and embedded devices.
On2 has more than 2 billion installations of its On2 Video VPx codecs, and its customers include AOL, Skype, Nokia, XM Satellite Radio, Sun Microsystems and Sony, the company says on its Web site.
On2 will provide Google with a "high-quality video compression technology," Sundar Pichai, vice president of product management of Google, said in a statement.
"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 deal shows Google's interest in pushing forward video technologies on a variety of mobile devices and through set-top boxes, said Gartner analyst Andrew Frank. The acquisition gives Google access to video compression software without paying licensing fees for MPEG's H.264 standard.
The acquisition allows Google to move forward with video projects without any "bottlenecks," Frank said.
The deal "reinforces the idea that Google is very serious about video," he added. "Video in the living room and video on the go are going to be major thrusts for Google in the future."
The deal's $US0.60 per share represents a premium of about 57 percent over the current price of On2's common stock, and a premium of about 62 percent over the average closing price of On2's common stock over the last six months.
The transaction, which is subject to On2 stockholder approval, regulatory clearances and other closing conditions, is expected to close in the fourth quarter of 2009.