Beats Electronics (Beats) comprises the ‘Beats by Dr. Dre’ line of premium consumer headphones and speakers, as well as patented Beats Audio software technology and streaming music subscription service Beats Music.
Apple acquired Beats for a total of $3bn, consisting of a purchase price of approximately $2.6bn and approximately $400m that will vest over time. The company’s founders, artist and producer Dr Dre and Jimmy Iovine, chairman of record company Interscope Geffen A&M, joined Apple as part of the acquisition.
Vivendi sold the 13% stake it held in Beats through its Universal Music subsidiary to Apple for $404m through the deal. An analyst told Bloomberg the value of the stake had almost doubled from September 2013, when it was estimated to be worth about $214m.
Beats Electronics raised $500m from private equity firm Carlyle Group in September 2013 in a deal that at the time valued the company at approximately $1bn.
Past investors in the business included Taiwan smartphone maker HTC, which paid $309m for a 50.1% stake in Beats Electronics in 2011 at a $600m valuation, but sold its stake back to the company over 2012 and 2013 for a total of about $415m.
Streaming service Beats Music separately raised $60m in funding in a March 2013 round led by Access Industries, the conglomerate that owns record company Warner Music, and assorted individual investors. It pulled in a further $60m in March 2014 from Access, Dre and Iovine, according to music industry news source Billboard.
“I’ve always known in my heart that Beats belonged with Apple,” said Jimmy Iovine. “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.”
The iconic Beats “b” headphone brand design has mass appeal thanks to its limited edition headsets, designed in collaboration with big name artists such as Lady Gaga, Lil Wayne and Nicki Minaj, as well as fashion designers and street artists like Alexander Wang and Futura, and famous athletes including LeBron James, Serena Williams and Neymar.
Beats has quickly become part of pop culture around the world, and the acquisition has led to the Beats product line being offered in many more countries through the Apple Online Store, Apple’s retail stores and select Apple Authorized Resellers.
Shortlist
Alios BioPharma – $1.75bn to Johnson & Johnson – NovartisVenture Fund, Roche Venture Fund, SR One, Novo Ventures
Beats – $3bn to Apple – Universal Music, HTC
Maker Studios – $500m to Walt Disney Company – Singtel Innov8, Time Warner Investments, Canal+, Team Downey
Skybox Imaging – $500m to Google – Norwest Venture Partners
Twitch – $970m to Amazon – Take Two Interactive