Apple is reportedly in talks to acquire Beats Electronics, the high-end audio products and equipment retailer co-founded by hip-hop mogul Dr Dre, in a deal worth $3.2 billion. The acquisition would be the company’s largest ever.
According to a Financial Times report, the deal could be announced as early as next week, although some details are yet to be ironed out and talks in the meantime could still fall apart. A deal of this size would be a departure for the Apple brand.
If the deal goes through, Apple will acquire Beats’ subscription music-streaming service alongside its hardware division, with the electronic company’s management team reporting to Apple CEO Tim Cook.
Founded by Dre and music producer Jimmy Iovine, Beats Electronics primarily produces products under the brand name “Beats by Dr. Dre”, its feature product being their trademark high-end headphones which range in price from $139-$519.
“This is really puzzling,” said Forrester analyst James McQuivey, as reported in Fairfax Media. “You buy companies today to get technologies that no one else or customers that no one has. They must have something hidden under the hood.”
The Financial Times report posits that Apple may be looking to acquire Beats to instil a “cool factor” into the Californian company, which has been waning in popularity thanks to slowing music sales and competitor Samsung’s effective marketing campaigns.
According to Forbes, Beats Music holds patents on certain useful software technology, and its subscription streaming music service could help Apple’s iTunes service expand in reach and generate a entirely new list of subscribers for Apple.
This would not be Beats’ first time at the rodeo with a telco investor. Electronics maker HTC bought half the company in 2011 for $300 million, only to sell back half of that stake in July 2012 and the rest in September 2013.
Beats Electronics was valued at $1bn last September, when a the Carlyle Group, a top private equity firm, invested $500 million in Dre’s company. Beats also reportedly raised US $60 million in funding from others billionaires, including our very own James Packer.
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