HTC sells back Beats shares to ‘realign’ dealings

FLEXIBLE PARTNERSHIP::The smartphone giant said it would retain 25 percent ownership of the lucrative headphone brand, featured on several of its products

By Kevin Chen  /  Staff reporter

Mon, Jul 23, 2012 - Page 13

Smartphone maker HTC Corp (宏達電) said yesterday it had reached an agreement with Beats Electronics LLC, selling back nearly half of its stake in the high-end headphone maker for US$150 million.

HTC, the world’s No. 5 smartphone vendor, announced in August last year it would acquire a 51 percent stake in the US company through its subsidiary, HTC America Holding Inc, for about US$309 million.

The Taiwanese firm has since launched several smartphones equipped with headphones that bear the name of superstar music producer Dr Dre in an attempt to appeal to young customers and requisition market share from Apple Inc and Samsung Electronics Co.


HTC said yesterday in an e-mailed statement that it would still be the largest outside shareholder in Beats after the share sale and the two companies would continue to work closely, including a joint global marketing campaign later this year.

Still, the company is expected to book an investment loss of US$4.88 million, based on the headphone company’s current book value, according to the statement.

“HTC and Beats today announced a realignment of their business agreement that provides Beats with more flexibility for global expansion while maintaining HTC’s major stake and commercial exclusivity in mobile,” HTC said in the statement.

“Under the terms of the agreement, the founding members of Beats will buy back 25 percent of its total shares for a total of approximately 75 percent ownership, with HTC remaining the largest outside shareholder with approximately 25 percent,” it said.


Meanwhile, the phone maker has also agreed to offer a US$225 million loan to Beats to fulfill the latter’s working capital requirement, according to a separate statement.

The loan offering came after HTC announced on July 3 that Beats had acquired the digital music streaming service MOG Inc for US$14 million as the US company aims to establish a firm foothold in various parts of digital music platform.

The terms of the loan is a three-month LIBOR (London InterBank Offered Rate) plus 1.5 to 7.5 percentage points and the US company will repay the loan by July 20 next year, with collateral including all the assets of the Beats such as accounts receivable, inventory and intellectual property, HTC said.

Shares in HTC closed up 1.01 percent at NT$300 on Friday in Taipei trading. The stock has dropped 39.64 percent so far this year and plunged 76.92 percent from as high as NT$1,300 in April last year due to an increasingly competitive smartphone market amid a dismal global economic outlook.