Jimmy Ioving and Dr. Dre know music. They’ve also done a fairly good job marketing expensive, colorful headphones that have a strong following for those under the age of forty. No matter what you’re device you’re playing music on, ultimately you will be limited by your headphones, or so Beats would have you believe. Now, it appears that in addition to great sound, Dre and Ioving have found a sound investor in a top private equity firm, the Carlyle Group LP (NASDAQ:CG).
Beats secured investment from Carlyle
Beats announced today that is has secured a minority investment from Carlyle. It’s believed that Carlyle is paying $500 million for a company its values at over a $1 billion. Carlyle Group LP (NASDAQ:CG)’s investment will also get them two of six seats on Beats’ board.
In a separate statement, HTC Corp (TPE:2498) announced that it received $265 million for its 25 percent stake in Beats. In addition to the stake it bought back in itself, Beats also repaid a $150 million note to HTC according to the HTC announcement.
This fund run by a SAC Capital alum bought restaurant stocks amid the pandemic
Prentice Capital Management was up 6.6% for the first four months of the year, compared to the S&P 500's 9.3% decline and the Russell 2000's 21.1% decline. The HFRX Equity Hedge Index was down 9.4% for the quarter. Q1 2020 hedge fund letters, conferences and more Gross and net exposures In his first-quarter letter to Read More
While Beats has done well in attracting outside investors, this deal is one of its biggest. In a short time, Beats has claimed a 64 percent market share in headphones priced over $100 according to the NPD Group. Beats, however, is not content with headphones and is now selling speakers and sound systems for HP computers, as well as HTC Corp (TPE:2498) phones. It also purchased the music streaming company Mog last year for just shy of $15 million.
Carlyle’s investment biggest for Beats
The investment by Carlyle Group LP (NASDAQ:CG) is one of the biggest yet to Beats, whose signature Beats by Dr. Dre headphones have seized a huge portion of the premium headphone market. The company claims about 64 percent of the market for headphones costing more than $100, according to the NPD Group.
Analysts believe that with this diversification, Beats will see revenue upwards of $1.2 billion this year.
“These transactions represent the evolution of the financial strength and significant growth prospects of Beats,” Mr. Iovine, the company’s chief executive, said in a statement.
Beats and HTC partnership
While Beats certainly did well with its partnership with HTC Corp (TPE:2498), who originally purchased a fifty-percent stake in Beats, it’s clear that Iovine and Dre are interested in having more control over their company’s destiny. Thanks to the money from the Carlyle Group LP (NASDAQ:CG), good or bad they have gotten their wish.
The Asian cellphone maker bought half of Beats three years ago for about $309 million, and soon afterward began putting Beats sound systems in some of its phones.
“We are confident that Beats will continue to drive innovation and growth in the premium audio accessory market, particularly as the proliferation of smart phones and tablets stimulate increased consumption of digital media,” Sandra Horbach, Carlyle Group LP (NASDAQ:CG)’s head of consumer and retail, said in a statement.
Mr. Iovine added, “Carlyle is a fantastic investment partner and we look forward to building the next chapter of Beats.”