Last summer, I noted that activist hedge fund Steel Partners had taken a big stake in contract driller Rowan Companies (NYSE: RDC). Having heard fellow driller Nabors Industries (NYSE: NBR) discuss the possibility of spinning off its rig manufacturing segment, I surmised that Steel Partners probably had something similar in mind with regards to Rowan and its LeTourneau Technologies subsidiary. LeTourneau has designed or built about one-third of all jack-up rigs worldwide.

Sure enough, Steel Partners announced in early January that, believing there to be a "conglomerate discount" applied to Rowan shares, the fund would be seeking board seats at the next annual meeting in order to unlock value. Rowan quickly replied that it was willing to talk.

The company has gone about its business, securing new business with the likes of McMoRan Exploration (NYSE: MMR) in the Gulf of Mexico and Saudi Aramco for multi-year term work in offshore Saudi Arabia.

But all the while, a pending proxy battle percolated in the background.

Well, Rowan must have found Steel Partners persuasive, because the driller has asked Lehman Brothers and Morgan Stanley to help it sell LeTourneau. As long as the deal is completed by year-end, Steel won't seek board representation.

The sale will immediately free up a lot of cash, $400 million of which Rowan has earmarked for share buybacks. The conglomerate discount appears to have dissipated, as investors bid up the stock today. Whether the firm will lose flexibility to meet customer needs over the longer term is a question that no one seems to be asking today.

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Fool contributor Toby Shute doesn't have a position in any company mentioned. The Motley Fool has a disclosure policy.