Google has announced today that it will acquire On2 Technolgies Inc., a leader in the world of video compression technology. According to the agreement, each outstanding share of On2 common stock will be converted into $.60 worth of Google class A common stock. It is reported that the transaction is worth roughly $106.5 million.

It's no secret that video is an integral part of today's web experience, and high-quality compression technology goes hand-in-hand. Google - who owns the immensely popular video sharing service YouTube - believes that On2's team and technology will aid in the innovation of web-based video quality. On2 CEO Matt Frost is enthused about the deal, calling the transaction a "testament to the hard work of every On2 employee."

It is reported that $.60 per share represents a premium of about 57% over the closing price of On2's common stock. It is a 62% premium over the average closing price of On2's common stock for the most recent six month period. The transaction is still subject to On2 stockholder approval, regulatory clearances and other closing conditions, but is expected to close in the fourth quarter of this year.