Dr. Dre can finally afford to provide his family with groceries. After weeks of rumour, speculation and general head scratching about what on Earth was going on, Apple has made public its $3bn purchase of Dr. Dre’s Beats Electronics.
The enormous deal includes $2.6 billion in cash paid up front, as well as $400 million in stock that will vest over time. Dre, real name Andre Young, and Beats co-founder Jimmy Iovine will join Apple in undisclosed roles. The deal represents perhaps Apple’s biggest fiscal move since purchasing Steve Jobs’ NeXT computer company in 1997.
The purchase price may seem high but it accounts for a fraction of Apple’s $160 billion cash stockpile and is on a par with other recent notable tech acquisitions, not least Google’s $3.2 billion purchase of Nest. Beats revenue reached $1.5 billion in 2013, so it’s no stranger to bringing in cash.
The deal includes Beats Music, a streaming audio service in the same mould as Spotify, which many believe is the primary reason Apple has put pen to paper.The acquisition of such a service gives the electronics giant a means of closing the gap on more established rivals in this emerging space.
“Music is such an important part of all of our lives and holds a special place within our hearts at Apple,” CEO Tim Cook said in a statement. “That’s why we have kept investing in music and are bringing together these extraordinary teams so we can continue to create the most innovative music products and services in the world.”
Jimmy Iovine commented: “I’ve always known in my heart that Beats belonged with Apple. The idea when we started the company was inspired by Apple’s unmatched ability to marry culture and technology. Apple’s deep commitment to music fans, artists, songwriters and the music industry is something special.”
Subject to regulatory approvals, Apple expects the transaction to close in fiscal Q4.