Beats by Apple
As had been previously rumored, Apple was expected to buy Beats to the tune of $3.2 billion, and after all of the due diligence had been completed the end result was that Apple would be buying Beats for $3.0 billion. The deal is being broken up into $2.6 billion in cash and $400 million in stock, which may end up valuing the deal even more if those who get stock decide to hold on to it and Apple’s [AAPL] shares continue to rise. According to Apple’s own CEO Tim Cook, “It’s all about the music.” Ultimately, Apple is buying a competing service to iTunes Radio which has struggled to compete with services like Spotify, Pandora and Beats Music. Many people within the music industry accept that Beats Music’s unique approach may be one of the best in the industry and allows for a very personalized experience while still giving good recommendations.
From Left to right, Jimmy Iovine, Tim Cook, Dr. Dre and Eddy Cue at Apple HQ
Apple is certainly overpaying for Beats Music as the entire company, including the Beats Electronics and Beats Music businesses for $3 billion. As we had stated in our earlier coverage of the purchase, the company was only recently valued at $1 billion in September through a $500 million stake in 50% of the company by Carlyle Group back in September of last year. Which means that Carlyle Group just walked away with $1 billion in profit for only holding a share in the company for less than a year. I don’t know about you, but I would certainly like to make $1 billion in less than a year by merely taking a stake in the company after they forced HTC to divest from them. Ultimately, HTC could’ve stood to benefit the most from Apple’s purchase of Beats, but unfortunately for them they were forced out of Beats. I also believe that Carlyle group probably had a pretty significant role in this acquisition and may have been the catalyst for it going through.
Either way, Apple now has its own headphone brand and music service, even though they state that in the current term Beats and Apple will remain separate brands. Ultimately, this is a huge win for Jimmy Iovine and Dr. Dre who will with his new found wealth probably forget that he never released his Detox album and probably leave it unreleased at this point.
