* Suit seeks to block Google's acquisition of On2
* Says 60 cents/share well below recent On2 level
* Seeks class action status for On2 shareholders
SAN FRANCISCO, Aug 12 Google Inc's (GOOG.O)
deal to buy video compression software company On2 Technologies
Inc ONT.A is being challenged in court by On2 shareholders
unhappy about the $106.5 million price and the terms of the
Google declined on Wednesday to comment on the suit, filed
in Delaware Chancery Court on Monday and seeking class action
status, as well as a permanent injunction blocking the deal.
The suit also called on the defendants to account for all
The move comes a week after Google announced the deal --
the first acquisition of a public company in its history.
The deal would give Google valuable technology as it seeks
to reduce the cost of operating its YouTube video site and to
foster the spread of video on the Internet.
Google's offer of 60 cents a share represents a 57 percent
premium from the closing price of On2's stock on the last
trading day before the announcement. According to the suit,
however, the price is well below the level where On2's stock
traded in the few months prior to the proposed transaction.
The suit alleges that, on May 13, On2's stock traded at 65
cents. The shares reached $1.16 in 2008, according to the
According to Reuters data, On2's shares began the second
quarter at about 30 cents and ended it at above 40 cents.
The complaint also notes that On2 reported its best
quarterly financial results in six quarters the day after the
deal was announced.
"Defendants rushed to announce the proposed transaction at
$0.60 per share on August 5th ahead of the positive earnings
results announced the next day, thereby placing a cap on the
company's stock price," the suit read.
According to the complaint, the deal contained various
provisions -- including a "no shop" clause and a $2 million
termination fee if On2's board accepts a superior deal -- to
ensure that no competing offers emerge.
On2 was not immediately available for comment.
(Reporting by Alexei Oreskovic; editing by Andre Grenon)