SFX Entertainment Inc. said Tuesday it has agreed to be taken private by Chief Executive Robert Sillerman in a deal that values the dance and music festival company at about $490 million.

Under the deal, Mr. Sillerman will acquire the remaining 62.6% of the stock that he doesn't already own for $5.25 a share in cash. That price tag represents a 27% premium over Friday's closing price and a boost from his February offer of $4.75 a share.

Shares surged 22% following the news to $5.01.

The New York-based concert promoter went public in October 2013 at $13 a share, but the stock began falling soon after its trading debut. In 2014, the company reported a loss of $131 million.

SFX said its board has approved the deal, subject to conditions. The transaction provides for a 45 day "go-shop" period, during which the company said it would actively solicit and evaluate competing takeover bids. A successful competing bidder would be responsible for the $7.8 million termination fee associated with Mr. Sillerman's bid, the company said.

Mr. Sillerman has agreed to vote his shares in favor of any superior proposal that has a value of at least 2.5% more than Mr. Sillerman's highest offer, SFX said Tuesday.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com

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