The handheld-device maker Palm will sell a 25 percent equity stake to Elevation Partners, the private equity firm backed by U2 singer Bono. As a part of the deal, Palm will pay $940 million to issue a special $9-per-share dividend to existing stockholders.

After the payout, shareholders will own 75 percent of the company, while Elevation Partners will own the remaining 25 percent. To finance the dividend, Palm will use the $325 million investment from Elevation Partners and issue $400 million in debt. Cash on hand will cover the balance.

Elevation's backing brings key new additions to Palm's management team. The Wall Street Journal reports that Jon Rubinstein, who helped launch the iPod for Apple, will head up product development at Palm as executive chairman.

In addition, two partners at Elevation will join Palm's board. Former Apple C.F.O. Fred Anderson and investor Roger McNamee will replace two current members of the Palm board.

Palm, a pioneer in the market for handheld devices and maker of the Treo, has recently struggled to keep up with bigger competitors such as Nokia and Research in Motion. And Palm will soon be competing with Apple as well, when Apple releases the iPhone on June 29.