A report out today indicates Beats Electronics, LLC, best known for their Beats Audio brand and headphones, is looking to buy out the remaining stake that HTC has in the company. The move comes as Beats is ready to court a new investor that can provide a new source of funds for planned growth into other areas like speakers, car audio systems, consumer electronics, and possibly an online streaming music service. HTC currently owns a 25% stake in Beats, half of what it owned after taking a controlling stake in Beats in 2011 for $300 million.
As part of the original deal, HTC incorporated audio software from Beats into their smartphones and other phones came bundled with Beats headphones, a move intended to raise the bar relative to Apple’s earbuds. Last year HTC provided Beats with a one-year $225 million loan secured by Beats’ assets. A new loan was put in place this year that will mature in July 2014.
During the two years the partnership between HTC and Beats has been in place, the financial position of Beats has continued to grow while HTC’s position has declined sharply. Despite their growth record, Beats has been unable to secure debt-financing that would let it buyout the HTC stake in the company. According to the report, Beats now has a new investor interested in the company and willing to provide debt financing in exchange for a minority position in the company. No details about the possible investor have been revealed.
HTC has not commented on whether it would sell its stake in Beats.
source: Wall Street Journal