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Apple Seals $3 Billion Deal to Acquire Beats Music and Electronics

The Beats deal marks Apple's largest acquisition to date

Apple has sealed a $3 billion deal to acquire the Beats Music streaming service and Beats Electronics audio gear business founded by Jimmy Iovine and Dr. Dre.

The deal marks the largest acquisition in Apple’s history. As part of the deal, Iovine and Dr. Dre will sign on as Apple employees after the transaction is completed, marking a changing of the guard for both the technology and music sectors. Iovine was previously chairman of Interscope Geffen A&M, one of Universal Music Group’s largest label groups.

“Music is such an important part of all of our lives and holds a special place within our hearts at Apple,” said Apple CEO Tim Cook. “That’s why we have kept investing in music and are bringing together these extraordinary teams so we can continue to create the most innovative music products and services in the world.”

SEE ALSO: John Janick to Replace Jimmy Iovine as CEO of Interscope Geffen A&M

Deal calls for Apple to fork over $2.6 billion to acquire the Beats companies, with another $400 million in compensation to vest over time. Apple said it expects the deal to close by year’s end.

The Apple logo won’t suddenly cover up the ‘B’ on Beats’ products, with the brands expected to remain separate entities, the companies said.

Beats’ Twitter feed sent out this message to its 522,000 followers on Wednesday:

And in a memo to Apple employees, Cook wrote:

Beats Music was built with deep respect for both artists and fans. We think it’s the first subscription service to really get it right. … Beats Electronics has become the brand of choice for headphones and speakers in both the music and sports world, just five years after its launch.”

The sale is a significant payout for Iovine and Dr. Dre, who launched the Santa Monica, Calif.-based company in 2008 as a venture that produces colorful headphones at a premium price of around $300. Its products, which became fashion accessories, were produced by Monster Cable until 2012, when founders bought back control of the company from Monster and mobile hardware maker HTC.

Apple said it plans to expand the reach of Beats’ products, making them available in more markets around the world, especially through its online store, physical stores and authorized resellers. Beats’ headphones and portable Pill speakers already were sold in Apple’s outlets.

Apple’s plans to acquire Beats first emerged earlier this month.

Deal represents a shift in strategy for Apple, considering it stayed away from making major acquisitions under Steve Jobs’ leadership — it has made smaller purchases, acquiring 27 companies during its fiscal year 2013 until now. Jobs also was opposed to launching a music streaming service, opting to build a business around digital sales through the iTunes store, believing consumers wouldn’t want to rent music.

Beats Music launched in January as a subscription service for $10 a month. In March, it had 110,000 subscribers. Apple is now expected to use the streaming service to compete with Spotify, Google Play Music, Pandora and Last.fm

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