Nuance Communications Inc. on Thursday said it agreed to repurchase $500 million of its stock—about 26.32 million shares—from activist investor Carl Icahn and affiliates.

The speech-recognition software maker will pay its largest stakeholder $19 a share, a 6% discount to the stock's closing price of $20.21 on Wednesday.

Icahn Associates Holding LLC holds 60.8 million shares, or about one-fifth of the company, according to FactSet. He began buying shares of Nuance in August 2013, when the stock was trading around $18.50, and built up his stake later in that year when shares traded below $14.

In recent premarket trading, Nuance shares slipped 4.8% to $19.25.

The transaction, which is expected to close March 15, would reduce the Burlington, Mass., company's projected fiscal 2016 weighted average shares outstanding by about 14.3 million. It is separate from the previously authorized share-repurchase program, "which will be limited for the foreseeable future," the company said.

Nuance said it would fund the transaction through a combination of $375 million cash on hand and a $125 million 90-day promissory note.

Write to Anne Steele at Anne.Steele@wsj.com

(END) Dow Jones Newswires

March 10, 2016 09:15 ET (14:15 GMT)

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