Hip-Hop mogul Dr. Dre just became the world’s first billionaire rapper. Apple bought Beats Electronics for $3.2 billion.
Beats Electronics is the company behind Dre’s popular “Beats by Dre” headphones. Dr. Dre and Jimmy Lovine founded Beats. Despite the hefty price tag for a pair of the headphones, they are a fashion statement with a signature “B” on the ear. They are as popular with teen as they are with celebrities.
Apple’s $3.2B Beats Buy Would Make Dre Rap’s Richest Man
Dr. Dre leapfrogged Jay Z in FORBES’ latest rankings of hip-hop’s richest artists, claiming the number two position as his net worth soared to an estimated $550 million. Now it looks like the Beats cofounder could lay claim to the top spot in a matter of days.
Late Thursday night, the Financial Times reported that Apple AAPL +0.11% was in talks to buy Beats for $3.2 billion; the deal would be the computer giant’s largest acquisition ever. Dre’s stake in Beats currently stands at somewhere around 20-25%; we valued the company at $2 billion in our latest round of estimates.
A sale for $3.2 billion would nearly double the value of Dre’s holdings, though capital gains taxes could take a bite out of his big payday, likely leaving him with a net worth in the neighborhood of $800 million. It’s not quite enough to land on the Forbes 400, but it would easily make him hip-hop’s richest man, topping current champion Diddy by $100 million.
“Beats has a unique brand—it speaks to a nice young demographic, which is really interesting to marketers,” said Peter Csathy, former president of Musicmatch, an early digital music purveyor acquired by Yahoo YHOO 0% in 2004 for $160 million. “When I think about Beats, I think about it as a lifestyle, I think of it as a media company, not just a hardware and music-focused company.”
The value of that brand would also make a handful of other wealthy entrepreneurs even wealthier if the Apple deal goes through. Beats recently raised $60 million in funding from current investors including Dre, cofounder Jimmy Iovine and billionaire Len Blavatnik, via his company Access Industries.
A sale would also nix the possibility of a Beats IPO, which some speculated could be in the offing after the company hired chief financial officer An De Vooght, who spent 16 years in a similar role at Red Bull after stints at Sony and Price Waterhouse, in March.
Apple’s Beats buyout is still not official, and could certainly fall through. In the meantime, though, Dre appears set to break new ground in the business of music yet again.