Narrowstep, the online video service provider backed and operated by RCN founder David McCourt, has been sold to another video provider Onstream Media, in an all stock-transaction. Under the deal, the shareholders of Narrowstep will receive 11.1 million shares of Onstream’s common stock plus the opportunity to earn up to an additional 8.9 million shares subject to performance in the next 18 months.

Narrowstep was founded in UK in 2006, but was based in Princeton, NJ. It has been involved in online video services from UK’s ITV (LSE: ITV), especially in its local video service. It has also also worked with Virgin Media (NSDQ: VMED), Fox International, Outdoor Channel, Georgetown University, and others. Its technology will be integrated within Onstream: the two companies will execute a restructuring plan to reduce expenses. Onstream expects that Narrowstep will generate operating cash flow on a standalone basis soon after the closing, which will take about 90-120 days.

Updated: Dan breaks down the financials of both the publicly traded companies, and doesn’t see much synergies...more here.

More details in release.

• William Morris Ties With Narrowstep For Broadband Channels; Video Aggregator Gets $7.1M Financing