UPDATE 1-Fairholme's Berkowitz can buy half of St. Joe

Fri Sep 16, 2011 10:19am EDT

* Fairholme funds can buy 50 pct of St Joe. shares

* Fairholme already owned 29 percent

* Shares up more than 7 pct in morning trade

Sept 16 (Reuters) - Florida real estate developer St Joe Co (JOE.N) said on Friday it reached an agreement allowing its largest shareholder, Bruce Berkowitz's Fairholme Capital, to buy up to 50 percent of its shares.

Shares of St. Joe, based in Watersound, Florida, were up 7.3 percent at $18.33 on Friday morning. The shares have lost 30 percent since the end of April.

Berkowitz, named Morningstar's equity fund manager of the decade in 2010, has been increasingly drawn into St Joe's turnaround efforts after hedge fund manager David Einhorn blasted the company as overvalued last October.

Earlier this year, Berkowitz quit St Joe's board of directors only to return weeks later as chairman.

St Joe owns some 574,000 acres in northwest Florida. But its development efforts have struggled since the real estate bubble burst in 2005 when its shares peaked at over $80.

The Securities and Exchange Commission is investigating whether St. Joe and Fairholme have violated antifraud provisions of the federal securities laws, the company disclosed in June. (Reporting by Aaron Pressman, editing by Matthew Lewis)