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Microsoft topples $426m Quadrangle deal

The software giant has bettered by $2 per share an earlier offer by the media and communications buyout firm during Greenfield Online's go-shop period.

Microsoft has agreed to buy Greenfield Online, a Connecticut-based provider of internet survey services and owner of European price comparison website ciao.com, for approximately $486 million (€330 million). The agreement trounced an earlier takeover offer of approximately $426 million by US media and communications-focused buyout firm Quadrangle Group.

Under the agreement with Microsoft, Greenfield shareholders will receive $17.50 in cash per share, representing a premium of 1.6 percent over Thursday’s closing share price and 32 percent over the closing share price on 13 June – the last trading day before Greenfield announced plans to sell itself to affiliates of Quadrangle for $15.50 per share.

Quadrangle’s agreement with Greenfield allowed for a 50-day go-shop period. On 26 August, the company announced that it had received a “superior” proposal from a “Fortune 100” strategic buyer and would terminate its agreement with Quadrangle if it did not beat the new offer price of $17.50 per share.

A spokesperson for Quadrangle declined to comment. However, a person familiar with the transaction said that the firm decided not to top Microsoft since the software giant had made clear its intention to outbid it if it increased its offer. Consequently, the firm walked away from the transaction, pocketing a $5 million transaction termination fee.

In late June, hedge fund Pennant Capital Management, which owns a 10 percent stake in Greenfield, urged the company’s directors to reject the Quadrangle offer.

“While we support selling the company, we believe the valuation of 8.6x 2008 EBITDA is inadequate . . . in light of the approximate 20x EBITDA multiple of recent transactions for companies in the comparison shopping business,” Alan Fournier, managing member of Pennant, wrote at the time, according to a regulatory filing.

For Microsoft, whose $47.5 billion bid to buy Yahoo! earlier this year failed after a protracted proxy contest, the transaction is one of its latest moves in its quest to catch-up with rival Google, which currently dominates the online search market. According to ComScore, a web usage tracker, Google has a 62 percent of the global search market share, compared with Microsoft’s 9 percent.

“Ciao will serve as our launch pad for commercial search in Europe, with its existing engaged user base of over 26.5 million visitors a month,” a spokesperson for Microsoft said in an email, adding that Ciao’s “market leadership” will enhance Microsoft’s Live Search experience to consumers and advertisers in Europe.

The company also plans to sell Greenfield’s internet survey solutions segment to an unnamed third party buyer and focus solely on Ciao. In the most recent fiscal year, approximately 74 percent of Greenfield’s revenues came from internet survey solutions and the rest from Ciao’s comparison shopping websites.

For Quadrangle, the failed transaction comes as the firm is trying to ambitiously expand its investments in the online search sector.

Earlier this month, it hired former Yahoo! chief operating officer Daniel Rosensweig to open and run another office in Silicon Valley. Although the Greenfield deal was struck prior, it had been one of the first transactions in which Rosensweig’s team had been actively involved.