Updated from 4:26 p.m. EST

Its leveraged buyout gone by the boards,

Affiliated Computer

( ACS) will do the next best thing: borrow a big slug of cash and use it to buy back nearly half the company from shareholders.

The tech outsourcing firm announced plans Thursday to repurchase up to 55.5 million shares -- 45% of the company -- through a Dutch auction tender offer that uses a price range of $56 to $63 apiece.

The shares closed at $57.17 Thursday.

Affiliated, which also reported slightly better-than-expected earnings Thursday, said the decision to do the exotic financing came after a strategic review with outside advisers.

"Based upon its review, the board determined that returning capital to the shareholders through the tender offer is an effective means of providing value to our shareholders and that increasing the company's financial leverage to fund the tender offer is a prudent use of our financial resources."

ACS says it has a commitment letter from Citigroup Global Markets Inc. that will be used to finance the tender offer. The offer is conditioned on receipt of the financing.

For about a month, Affiliated was reportedly on the verge of being taken private by a group led by Blackstone. Those negotiations broke off on Jan. 17.

The Dutch auction can be a boon to shareholders. Under it, shareholders tender stock within the fixed range, and ACS selects the lowest per-share price that allows it to buy 55.5 million shares, or fewer if fewer are tendered. All shares accepted in the offer will be purchased at the same price per share, even if the stockholder tendered at a lower price.

When coupled with borrowing, a Dutch auction bears a resemblance to a leveraged buyout. In both cases, part of the equity in a company's capital structure is replaced with debt financing, leaving owners with a greater share of earnings. But the owners also face greater degree of risk because of the obligation to service and repay the debt.

The stock jumped $4.83, or 8.5% to $62 after hours. The bump leaves the shares close to their highest point of the takeover drama, $62.05, reached Jan. 6. They fell from above $60 to $56 apiece on the day the LBO talks were publicly terminated.

Generally, a company uses a Dutch auction to repurchase shares for two reasons, says Matt Rhodes-Kropf, a professor at Columbia Business School. Management believes the stock is a bargain, or big shareholders are trying to liquidate.

"This tends to be very good to stock prices over time," said Rhodes-Kropf. "If you are buying back shares, you think the company is undervalued. Who thinks the company is undervalued? The CEO. And he's one to know."

As a result, shareholders who keep their shares sometimes make out better than those who sell into the tender. An example is

Kerr-McGee

(KMG)

, which announced a debt-financed Dutch auction tender for its shares as activist investor Carl Icahn breathed down its neck in April. Kerr-McGee's shares have steadily risen since the buyback was announced, rising more than 30%, all told.

The results are less impressive at another Icahn target that tried the same kind of repurchase in early June,

Mylan Labs

(MYL) - Get Report

. Its shares were trading around $19.50 when the auction began, and they remain there today.

For shareholders trying to get out of the stock, a Dutch auction is a way to get a fair price that might not otherwise exist under normal market conditions.

Currently, the Van Kampen common stock fund holds the most shares in the company, with a market capitalization of around $150 million. Fidelity has the second largest holding at over $110 million, according to LionShares.com.