Earlier this summer, Google announced its intention to acquire video-compression vendor On2 Technologies in a stock-based transaction valued at approximately $106.5 million.
Some On2 shareholders took exception to the announced transaction. They filed suit to block the deal, arguing that On2’s board of directors violated its fiduciary duty in not attempting to find another prospective buyer for the company and in not demanding a higher price from Google.
At the time the lawsuit and attendant injunction request surfaced, I was skeptical of the disgruntled shareholders’ claims. The price Google was willing to pay for On2 seemed a fair valuation. In my view, the disaffected shareholders crafted the lawsuit to squeeze Google for an out-of-court settlement that would amount to a few more pennies per share.
Now, as reported by paidContent.org, an On2 SEC filing provides a chronological account of the background behind the merger. If the content in that filing is accurate, the shareholder lawsuit definitely appears to lack merit.
Basically, the SEC filing indicates that On2’s board performed its due diligence, upheld its fiduciary obligations, considered other potential buyers for the company (though it did not actively pursue them, for reasons explained in the filing), and negotiated upward from an original Google offer of 45 to 50 cents per share to the agreed price of 60 cents per share. At one point, the On2 board wanted as much as 90 cents per share and was pushing for a minimum of 65 cents, but Google stood firm with its final offer of 60 cents.
Having read the filing, I cannot see an instance of malfeasance, dereliction of duty, or impropriety in the actions of the On2 board of directors. The chronology suggests that the initial talks, subsequent negotiations, and eventual acquisition agreement followed a progressive, responsible course.