Google Inc sweetened its bid for On2 Technologies with a cash portion that boosts the deal value by 20 percent to $134 million, months after shareholders of the video compression technology company balked at the initial price.

Shares of Clifton Park, New York-based On2 rose 25 percent to 75 cents on Thursday morning after the two companies announced the revised deal.

On2 shareholders will get an extra 15 cents in cash for every On2 share they own, in addition to the previously announced 0.0010 of a share of Google Class A common stock for every share of On2 common stock.

The new offer is about $26.5 million higher than Google's previous offer. That amounts to a total value 76 cents a share in cash and stock, based on On2's Wednesday closing price of 60 cents a share on the American Stock Exchange and 176.6 million outstanding shares.

Google said in August it would buy On2 to step up efforts to foster the spread of Internet video. On2's technology shrinks video files, making it easier to send them over the Internet.

But On2 shareholders challenged the deal because they were unhappy with the price and terms.

On Thursday, Google said its revised offer to On2 constitutes its final offer.

Shares of Google were trading at $602.76, down about 1 percent, on the Nasdaq.

(Reporting by Anupreeta Das; Editing by Derek Caney, Dave Zimmerman)

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