Nasdaq-listed IncrediMail, which develops and markets email and other desktop software products, is to acquire Smilebox, a U.S. company that develops consumer-focused photo sharing and scrapbook creation tools.

Under the terms of the agreement, IncrediMail will pay $25 million, mostly in cash, with additional payments of up to $15 million in earn-out fees if certain milestones and performance based conditions are met. The company says approximately 10 percent of the acquisition consideration will be held in escrow for 18 months.

According to its CrunchBase profile, Smilebox raised $14 million in funding since its inception.

IncrediMail CEO Josef Mandelbaum in a statement says buying Smilebox allows the company to diversify its product portfolio and increase its premium subscription base. IncrediMail offers a desktop-based email program and a range of add-ons like a browser toolbar and an instant messaging tool.

The company also markets PhotoJoy, a free application that let users create personal wallpapers and screensavers using his or her own digital photos.

Smilebox, which was founded in 2005 by Andrew Wright, also offers a desktop application that allows users to use personal photos and videos to build ecards, invitations, slideshows, scrapbooks, photo albums and whatnot (see also Animoto, Muvee and Photobucket).

Smilebox says more than 15 million people have installed the software since the service was launched in June 2006.

IncrediMail says it expects its new asset to generate cash sales in excess of $15 million in 2012 and be EBITDA accretive in the second half of 2012.

After closing, Smilebox will continue to operate from its Redmond-based offices, which currently employs roughly 50 people.

This comes after the heavily funded company’s most recent “follow-on” round where it raised $2m specifically for international expansion. Its previous series B round in December 2007 led by Bessemer Ventures and Frazier Technology Ventures saw Smilebox raise $7m, having previously received $5m from Frazier and a host of prominent angels. In case you’re not paying attention, that totals no less than $14m.

The localised version includes British Pound currency support, a custom design catalog “tailored to British consumers” and new Smilebox designs from leading UK artists. To-date, Smilebox has released over 30 designs working together with Hallmark UK artists and the Caroline Gardner designer studio. The company operates a freemium model, charging for additional premium designs, the removal of ads etc.

Perhaps more interesting is who the service is resonating with in the U.K. In an “exit survey”, presumably taken when users closed the Smilebox Mac/Windows app, the company found that 85% were women and 68% were parents, which given the family photo sharing nature of the service, makes sense. Furthermore, 74% of Smilebox UK users who took the survey are members of Facebook (no surprise there) and 16% own an iPhone.

Smilebox released its desktop media client for Mac users today. The Flash-based tool can be used to compile digital slideshows, postcards, scrapbooks, and other arrangements for sharing photos and videos with friends and family.

Playing with Smilebox is a bit like browsing the greeting card aisle at your local supermarket. The template designs are either tasteful or tacky, depending on your aesthetic sensibilities. But they’re certainly not beautiful. The available audio overlays are also pleasant enough but not terribly exciting (fortunately paying users can upload their own tracks).

Smilebox is a freemium service: subscribers enjoy the extra music tracks, full-screen capabilities, and respite from advertisements kept from stingy basic users.

I’d like to see Smilebox develop a completely in-browser producer tool (it’s based in Flash anyway – can it be that hard to port over?), and allow its creations to play within the actual embed, as is the case with other widget companies (Slide, etc). If you click on my photo boat above, you’ll see a new window pop up.

The Redmond-based company raised $7 million last fall and has accrued $12 million overall so far.

Smilebox, a site where you can create a variety of media presentations (such slideshows, ecards, scrapbooks, photobooks, and postcards) by loading your own amateur photos and videos into designer templates, has raised $7M in Series B financing. The round was led by Bessemer Venture Partners and joined by Frazier Technology Ventures.

The company says that it has garnered 1.8M users since its launch in June 2006, and that it experiences over 1.3M unique users monthly. Smilebox has recently been improved to allow for integration of music from media players like iTunes and automatic posting of creations to Facebook. The company has also partnered with several companies for distribution including Six Apart (creator of Vox) and Corel.

In unrelated news, European social network for young students Bahu has raised $1M in its first round of funding, led by theLightspeed-Gemini Internet Lab (LGiLab). The company says that Bahu differentiates itself from other social networks by focusing on users’ talents and helping to showcase them.

In addition to raising some money, Bahu has also appointed Ouriel Ohayon (editor of TechCrunch France) to its board of directors. Bahu was launched in July and claims to already have over 300,000 international users and to have experienced 15M page views in November.