Bits and pieces on the potential Apple, Beats deal

Lots has been written about Apple’s potential acquisition of Beats. This is my attempt to gather some of the facts in a single place.

The company behind the Beats products is Beats Electronics LLC. From their web site:

Formally established in 2008 as the brainchild of legendary artist and producer Dr. Dre and Chairman of Interscope Geffen A&M Records Jimmy Iovine, Beats Electronics (Beats) comprises the Beats™ by Dr. Dre™ family of premium consumer headphones, earphones, and speakers as well as patented Beats Audio™ software technology and streaming music subscription service Beats Music™. Through these offerings, Beats has effectively brought the energy, emotion and excitement of playback in the recording studio to the listening experience and has introduced an entirely new generation to the possibilities of premium sound entertainment.

Additionally, Beats reaches consumers through strategic product partnerships that include Chrysler Group automobiles and Hewlett Packard computers and monitors.

Led by Co-Founder & CEO Jimmy Iovine, Co-Founder Dr. Dre, and President Luke Wood, Beats Electronics is based in Santa Monica, CA.

This is a potential acquisition, not a formally announced deal. The Financial Times broke the story and it moved across the internet like a wave.

The supposed acquisition price is $3.2 billion. The last cash injection into Beats Electronics was $500 million by Carlyle Group, a private equity placement firm. The money was placed last September (2013). Once the money was placed, the company was valued at $1 billion. A valuation increase from $1B to $3.2B in a little over 6 months is quite a leap. That said, I suspect Apple can add a lot to the Beats brand.

Beats has a streaming music service that appears to be part of the deal. Currently at about 200,000 subscribers, this does not seem to be a huge impact in the streaming space, but there certainly is potential there.

This would be Apple’s largest acquisition ever.

Bottom line, there is a lot of teeth gnashing and hand wringing from analysts over this deal. That doesn’t bother me at all. If it happens, I feel certain Apple has thought this through from soup to nuts and will turn this acquisition into an asset whose value exceeds the purchase price.