UPDATE 1-DryShips to buy remaining stake in rig unit

* To pay $50 mln in cash, $280 mln in preferred stock

* Shares drop as much as 5 pct in after-market trade

July 9 (Reuters) - DryShips Inc (DRYS.O) said it will buy the remaining 25 percent stake in Primelead Shareholders Inc for $50 million in cash and $280 million in convertible preferred stock, making the drilling rig unit its wholly owned subsidiary.

The sellers consist of a company controlled by the Greek dry bulk carrier's Chief Executive George Economou and clients of Cardiff Marine Inc, which was founded by Economou and provides technical and commercial ship management to DryShips.

The company said the preferred stock, which carries normal voting rights, will mandatorily convert into common shares of DryShips at a 27.5 percent premium to the established price of $5.36 per share.

The preferred stock can also be converted any time at a 42.9 percent premium to the established share price, and bears a 6.75 percent cumulative dividend payable in additional shares of preferred stock.

Primelead's assets mainly comprise of two owned and operational ultra deepwater semisubmersible drilling rigs and four newbuilding drillship contracts, DryShips said.

Shares of the company fell to $5.01 in trading after the bell. They closed at $5.26 Thursday on Nasdaq. (Reporting by Antonita Madonna Devotta in Bangalore; Editing by Unnikrishnan Nair)