Microsoft saysd it is acquiring Greenfield Online, which owns European shopping and price comparison website Ciao GmbH, one of Europe's leading price comparison, shopping and consumer reviews sites, to strengthen Microsoft's search and e-commerce services in Europe, in an all-cash $486-million deal.

Under the terms of the agreement, Microsoft will commence a cash tender offer to purchase all of the outstanding shares of Greenfield Online for $17.50 per share and hopes to complete the deal in the fourth quarter.

Upon close of the agreement, Ciao's technology platform, online community and extensive merchant relationships will be integrated within the Live Search platform  and Rajat Taneja, general manager for worldwide commercial search at Microsoft will now look after Ciao.

Microsoft will split up Greenfield Online and sell off the internet survey business that Greenfield owns, for which it claims to have found a buyer.

In June a consortium led by private equity fund Quadrangle Group made a definitive offer acquiring Greenfield at $15.50 a share for $426 million. Greenfield set Quadrangle an August 29 deadline to top Microsoft's $17.50 offer, failing which Greenfield would be entitled to end the deal.

Greenfield will now pay Quadrangle a $5 million termiantion fee.

Based in Munich, Germany, Ciao allows surfers to compare and review prices of computers, cameras and other merchandise in shopping portals in France, Germany, Italy, the Netherlands, Spain, Sweden and the UK. Greenfield is paid a commission from the seller when people use the site to buy products.

Microsoft had launched its own comparison shopping and search reward site, 'Live Search' in May this year for US surfers and had bought a similar site in the US last year called Jellyfish. In order to attract surfers to use 'Live Search' rather than Google or Yahoo, Microsoft had offered rebates on their online purchases through a 'cashback' service (See: Microsoft to buy internet search with Cashback to 'get Google') 

The cashback service was itself a marketing scheme employed by Jellyfish.

With Ciao being present in seven countries Microsoft wants to extend its commercial search engine to Europe.

To make 'Live Search' into a premier search engine and compete with the market leader – Google, Microsoft tried unsuccessfully to acquire Yahoo Inc.

Microsoft will need to spend at least $1.2 billion annually to match Google's research and development and much more in marketing.

Yahoo the other popular search engine company had recently acquired a French comparison shopping service company called Kelkoo, which operates in ten European countries and runs Yahoo's own-brand comparison shopping service in France, Germany, Italy, Spain, the U.K. and Taiwan.

For the six months ended June, Greenfield revenue was $66.9 million and made profit of $1.97 million.