Firm to buy 25% stake in Palm

Palm Inc. is selling a quarter of its company to a private equity firm to arm itself with new leadership, most notably the former technical guru behind the iPod.

The deal with Elevation Partners -- which agreed to invest $325 million for a 25% stake in Palm -- will infuse new talent in the hand-held computer pioneer as it battles stiffening competition that will only get tougher with Apple Inc.’s June 29 launch of the iPhone.

As part of the deal, Palm will pay a special distribution of $9 a share, or about $940 million in cash, to shareholders.

Palm said Elevation Partners’ Fred Anderson and Roger McNamee would join Palm’s board, and Apple’s former top hardware engineer, Jon Rubinstein, would join the board as executive chairman.

Shares of Sunnyvale, Calif.-based Palm gained 9.2%, or $1.48, to $17.57.