UPDATE 1-Sun's largest shareholder sells stake

* Fund sells most of Sun stake before Oracle deal closes

* Stake sold at prices between $9.04-$9.09 per share

NEW YORK, April 21 (Reuters) - Sun Microsystems Inc's (JAVA.O) largest shareholder, Southeastern Asset Management, has sold most of its stake in the technology company before its acquisition by Oracle Corp (ORCL.O).

Memphis, Tennessee-based Southeastern, which is run by prominent value investor O. Mason Hawkins, was instrumental in bringing the two companies together, people with knowledge of the matter told Reuters on Monday. [ID:nN20261500]

Southeastern sold most of its 162 million shares, or about 22 percent of Sun, to unnamed parties on April 20, at prices ranging from $9.04 per share to $9.09 per share, according to a regulatory filing.

Oracle said on Monday it would buy Sun for $9.50 a share, several days after merger talks between International Business Machines Corp (IBM.N) and Sun broke down.

Based on about 743 million Sun shares outstanding as of Dec 28, the equity value of the deal is $7.1 billion.

Southeastern, which spent $2.1 billion to purchase its stake in Sun over several years according to regulatory filings, would have lost roughly $500 million on its investment if it sold the 162 million shares at $9.50 a share.

By selling its stake at prices about 5 percent lower than Oracle's offer price, Southeastern has lost an additional amount between $65 million and $80 million.

But at the same time, the investment firm, which has $23 billion in assets under management, cut out all risk that the deal could fall apart and send Sun's shares tanking again. It also freed up cash it can put to use elsewhere.

Oracle said on Monday it expects to close the deal this summer. The company also said if the merger is terminated, it may have to pay Sun a break-up fee of $260 million. [ID:nN20381533] (Reporting by Anupreeta Das; Editing by Steve Orlofsky)