Apple Officially Buys Beats, Dr. Dre & Jimmy Iovine Become Apple Execs
It’s official! Wednesday (May 28th), Apple announced its $3 billion acquisition of Beats Electronics, a headphone and music streaming specialist. The deal brings along the expertise of Dr. Dre and Jimmy Iovine.
Rumors of this announcement were shared earlier this month, when it was leaked to the media.
According to the Associated Press, this is the expensive acquisition in Apple’s 38-year history. Reportedly, the price consists of $2.6 billion in cash and $400 million in Apple stock that will vest over an unspecified time period. The deal is expected to close before the end of September.
Apple CEO Tim Cook said in an interview of Dre and Iovine:
We have known these guys forever. We’ve dated, we’ve gone steady and now we are getting married. This relationship started a decade ago, so we know there is an incredible cultural fit. These two guys have a very rare set of skills. It’s like finding a particular grain of sand on the beach. It’s that rare.
Both (Dre and Iovine) will become key executives in Apple’s music divisions, though Cook said their roles haven’t been determined yet.
While initial reports suggested it, it doesn’t appear that the deal will make Dre the first black, hip-hop billionaire. Check out Forbes’ break-down of their finances, earlier this week:
…we pegged Iovine’s net worth at $970 million, about $170 million ahead of Dr. Dre. Here’s why we’re not ready to pronounce either a billionaire just yet.
First of all, Apple’s acquisition of Beats hasn’t been completed. Though it’s still likely to happen by most accounts, the deal has taken much longer to finish than initially anticipated, and a recent report by the New York Post suggests the final purchase price may be $3 billion, not $3.2 billion.
Then there’s the matter of Uncle Sam. Even if the deal goes through at $3.2 billion, it’s unclear how much will be paid in Apple stock and how much will be paid in cash. The computer giant is said to be interested in keeping Beats’ cofounders around as executives; some observers have suggested that Apple thinks Iovine could be the next Steve Jobs.
That would seem to suggest a payout packed with Apple stock, which could provide greater incentive for both men to stick around. But Apple is sitting on a whopping $150 billion in cash, or roughly 10% of all corporate cash held by nonfinancial companies, and may view its stock as more valuable to hold onto. Uncle Sam would take a hefty tax bite out of a cash payment.
Dr. Dre’s net worth from a recent $550 million to somewhere between $700 million and $800 million, making him hip-hop’s richest man.
If Apple does indeed buy Beats for $3.2 billion, and the payment is mostly in stock, Iovine may well become a billionaire in the near future, and Dre perhaps a bit further down the line.
Nonetheless, congrats two them both! [Associated Press, Forbes]