UPDATE 4-CDW to be bought by Madison Dearborn for $7.3 bln

(Recasts with definitive agreement, previous dateline NEW YORK)

LOS ANGELES,May 29 (Reuters) - Computer retailer CDW Corp. CDWC.O on Tuesday said it agreed to be bought by Madison Dearborn Partners LLC for $7.3 billion, after its shares rose on an earlier report that it was in takeover talks.

CDW shares, which have already climbed about 39 percent since early March, rose this morning on Nasdaq to $84.90, their highest level since September 2000. The stock gave up some of its gains in afternoon trade to close up $7.55 a share, or nearly 10 percent, to $83.11.

The Wall Street Journal earlier on Tuesday said that Madison Dearborn Partners was considered the front-runner among various private equity firms talking with CDW, which has a market capitalization of about $6 billion.

CDW in a statement late on Tuesday said its board had held an auction for various potential bidders before it approved the Madison Dearborn deal, under which CDW shareholders will get $87.75 in cash for each share of CDW common stock.

The price represents a premium of about 16.1 percent over CDW's closing share price of $75.56 on May 25, 2007, the last trading day prior to published reports regarding a potential transaction. CDW said that under terms of the deal, its board will not declare an annual dividend in 2007.

Completion of the transaction, subject to shareholder and regulatory approvals, is expected near the end of the third quarter or early in the fourth quarter of 2007. In the meantime, CDW said it will actively solicit proposals from third parties during the next 30 days.

CDW founder Michael Krasny, who serves as the company's chairman emeritus, owned about 22 percent of CDW's outstanding shares, as of the end of March.

The company on Tuesday said Krasny has agreed to vote or cause such shares to be be voted in favor of the merger.

CDW, which mainly sells to government agencies and businesses through a Web-based catalog, last month posted a 24.5 percent rise in first-quarter net income, buoyed by higher sales of notebook computers, storage equipment, software and video-related equipment.

The results came after the company had expanded its distribution capacity, reorganized its sales force and entered a new market -- selling complex computer systems customized for each client -- in a bid to boost sales.

CDW competes against companies like Insight Enterprises Inc. (NSIT.O) and Dell Inc. (DELL.O).