MKV H264 bitrate reduction (also DTS to AC3)

[Tooncis]

I need to reduce the bitrate of an MKV file with H264 encoding. I also need to convert the DTS audio to AC3 or some other similar format.

Is there something for the H264 that can reduce the bitrate (like DVDShrink)? If not, what is the easiest/fastest bitrate compression program/method?

I can demux if necessary.