A group of investors that includes Michael Ovitz and former IBM topper Jerome York said Tuesday it will acquire catalog and online computer products retailer Micro Warehouse Inc. for $725 million.
Shareholders will receive $19 in cash for each share under terms of the deal to buy the Norwalk, Conn.-based retailer, a 44% premium over the stock’s slumping average price over the past 30 days.
Deal translates to a buyout price of approximately $500 million, after adjusting for cash and option proceeds, analysts said.
Micro Warehouse has been seen as a stock ripe for takeover by private investors, considering its low-price and small cap that’s cheap relative to its earnings.
Shares of Micro Warehouse rose $2.81 to close at $18.06, a gain of 18%. It hit a 52-week-high of $47 in February. The company has a market cap of $646 million.
The buyout gives Micro Warehouse a much-needed boost, as it has struggled with rising competition from other e-tailers, falling sales for its core Apple Computer product lines, management turmoil and shareholder lawsuits.
With Ovitz as a player behind the deal, Micro Warehouse could soon see its online retailing venture restructured, possibly becoming a part of the showbizzer’s own e-tailing operation CheckOut.com, which already sells computer programs, as well as homevids and music. CheckOut recently took over Wherehouse Music’s e-tailling efforts.
Micro Warehouse co-founder Peter Godfrey will be replaced by York as chairman and CEO. York was the well-respected chief financial officer of IBM in the mid-1990s.
In addition to York, who has been working for Kirk Kerkorian’s hotel and investment company Tracinda Corp., Gary Wilson, chairman of Northwest Airlines Corp. and investment firm Freeman Spogli & Co. Inc. round out the investment leaders.
Under the agreement unanimously approved by the Micro Warehouse board, a cash tender offer will begin within the next five business days for all Micro Warehouse shares. The acquisition is expected to be completed by the end of January.
Alfred Boyer of Boyer Capital Management arranged the deal on behalf of the private investor group, while Micro Warehouse was represented by Wasserstein Perella & Co. Inc.
Boyer is one of the investors, as is Alfred Checchi, former co-chairman of Northwest Airlines and a former candidate for governor of California.
Once the transaction is complete, a new seven member-board of directors will be established that includes York, Wilson, Boyer, Checchi and three representatives of Los Angeles-based Freeman Spogli.
Micro Warehouse said investment banks Credit Suisse First Boston and CIBC World Markets have committed to providing $320 million in debt financing at the close of the transaction.