Apple nears Beats purchase. Will it make Dr. Dre a billionaire? (+video)

Dr. Dre's headphones and audio streaming company, Beats, appears close to being acquired by Apple for $3.2 billion. The Beats deal would be the biggest purchase in Apple's history and likely make Dr. Dre rap's first billionaire. 

By , Staff writer

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    Dr. Dre wears a pair of Beats headphones as he attends Major League Baseball's 2010 season opener between the New York Yankees and Boston Red Sox in Boston, Apple Inc. is close to buying headphone maker Beats Electronics for $3.2 billion, according to the Financial Times.
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Rappers Dr. Dre, Jay-Z, and Sean “P. Diddy” Combs have all parlayed their fame into multimedia empires over the last two decades. Now, thanks to Apple, Dr. Dre will become the first among them to reach billionaire status. According to Dr. Dre, at least.

Apple is nearing a $3.2 billion deal to buy Beats Electronics, makers of the popular “Beats by Dre” headphones, for an estimated $3.2 billion, people familiar with the deal told the Financial Times late Thursday. Dre, whose given name is Andre Young, seemed to confirm the news Friday morning, appearing in a YouTube video posted by actor and R&B artist Tyrese Gibson and announcing himself as  “The first billionaire in hip hop right here from the [expletive] West Coast.”

 Mr. Gibson has since deleted the video.

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The deal is not expected to be finalized before early next week, but if it goes through, it would be the largest acquisition in Apple’s history. The software giant isn’t known for big-name purchases, generally preferring to keep its development in-house. Its largest purchase to date came in 1997, when the company bought NeXt Computer Systems for a comparatively paltry $400 million, according to the LA Times.  Apple CEO Tim Cook has been more aggressive in his acquisition strategy than predecessor Steve Jobs. In a recent earnings call with reporters, Mr. Cook said that Apple had acquired 24 companies over the past year and a half.

In addition to getting the wildly popular Beats headphone line, buying the company would attach Apple to a rising name in the streaming-music space, which is exploding. Beats was founded in 2008 by Dr. Dre and Interscope Geffen A&M Chairman Jimmy Iovine, initially selling high-end headphones (for  between $150 and $450 a pop) and speakers. Beats is privately held, so its financials aren’t public, but it reported $1.2 billion in revenue last year and nabbed a $500 million investment from the Carlyle Group, a private equity firm. At the time. Carlyle valued Beats at $1 billion.   

In January, it released Beats Music, a $10 per month subscription music-streaming service, to compete with Spotify, Pandora, Rhapsody, and Apple’s recently-launched iTunes Radio.

Dr. Dre’s music, producing, and entrepreneurial endeavors have made him one of the richest names in the rap industry. In April, Forbes estimated his net worth at $550 million. Apple’s Beats purchase would increase that figure significantly, although it’s not certain it would push him over the billionaire threshold. His actual stake in Beats is unknown, although he and Mr. Iovine combines reportedly own a majority of the company. And Dr. Dre wouldn’t have to be a majority owner to become a billionaire: At Apple’s purchase price, a 15 percent stake of Beats would give him the $450 million he needs for a $1 billion net worth. 

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