Seagate Technology has sold a stake in itself to ValueAct Capital in a deal that also provides the activist hedge fund with a front-row view of its board meetings, the hard-drive maker said on Friday.
Shares of Seagate briefly rose 4 percent in morning trade Friday. They later reversed and ended the day modestly lower.
ValueAct will receive an "observer board" position that will give it access to directors and their deliberations, but not voting power, as part of the purchase, which is equivalent to about 4 percent of the outstanding shares.
In an unusual move, Seagate said in a statement that it had invited ValueAct to buy its stock. Activists have aggressively targeted U.S. companies over the last five years, pushing for better cash management, leadership changes and new strategies.
Companies often resist activist campaigns, and sometimes the contention results in a proxy fight, where the hedge fund tries to replace board members with its own nominees.
But Seagate's invitation to ValueAct shows that the company respects the firm's track record and expertise in the tech sector and seeks its support and guidance.
ValueAct obtained the Seagate stake through a block trade. That means that rather than buying shares on the open market, it exchanged them with an existing Seagate investor, who was not identified.
ValueAct's recent investments include a $1.1 billion stake in investment bank Morgan Stanley, where the firm has not yet demanded a board seat or agitated for major changes. The San Francisco-based fund also said in July that it bought a 6.8 percent stake in railcar maker Trinity Industries worth around $111 million.
The ValueAct position that has gained the most attention in the last year has been a longtime holding in Valeant Pharmaceuticals International, whose shares have plunged nearly 90 percent since it was embroiled in a scandal involving its accounting practices.
ValueAct, which with more than $16 billion under management is one of the largest activist investors, has invested in Seagate before.
Other tech industry investments by ValueAct include Microsoft, where it has a board seat. The firm also had a stake in Adobe Systems that it sold.