Dr. Dre's "Billionaire" Comments Could Complicate Apple's Purchase of Beats Electronics

posted Friday May 09 ,2014 at 03:01PM CDT | 114 comments

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Exclusive: HipHopDX spoke with Mergers & Acquisitions expert, Corey Davis about whether Dr. Dre broke confidentiality agreements between Beats Electronics and Apple by alluding to being "the first billionaire in Hip Hop."

Dr. Dre was seen in a video released by Tyrese stating that he is “the first billionaire in Hip Hop” last night (May 8) during what appears to be a celebration of Apple’s rumored acquisition of Beats Electronics. While the Financial Times reported that Apple would acquire the company for $3.2 billion, neither electronics powerhouse has confirmed the transaction. Since the deal has yet to be announced officially, does Dr. Dre’s statement potentially jeopardize confidentiality agreements tied to the multibillion-dollar deal?

To shed light on whether Dr. Dre’s comment broke standard confidentiality agreements, HipHopDX asked White, Weld & Co Securities Managing Director, Corey Davis for his expert opinion.

Mr. Davis says that, “While there is a large amount of speculation in the media about a potential deal with Apple and Beats Electronics, there has yet to be any direct confirmation from the parties involved. I reviewed the video of Tyrese and Dr. Dre talking about the ‘first hip hop billionaire’ and changing the Forbes list. A viewer could infer from the media speculation that Dre is referring to his newly found wealth as a result of the rumored deal.

“The answer to your question regarding whether or not this 'statement' breaks any confidentiality clauses falls into a 'grey' area,” Davis says. He continues:

“There are ethics, there are morals and then there is the law. While I am not a lawyer, one could argue that he didn’t break any laws because (i) even without a deal, the company now has an implied value of $3.2 billion (or more); and (ii) neither Dre or Tyrese mention Apple. I am sure their lawyers aren’t pleased about the video given that it has been removed from Tyrese’s Facebook page.

“Finally, as a privately held company, any leaks of a deal will not cause the deal price to go up—with the exception that it might entice new bidders to come to the fore. However, if the bankers did their job, you would expect all of the likely buyers to have already been contacted. In fact, their lapse in judgment could have an unintended consequence that could cause the deal to collapse. If investors think a deal between Apple and Beats Electronics doesn’t make sense, they could sell Apple stock causing the share price to decline—sending a strong message to Apple management that they don’t approve. If the deal hasn’t been inked, it could cause management to rethink their decision.” 

Mr. Davis is a respected executive and strategic advisor with over 18 years of experience. Throughout his career, Mr. Davis has advised on over $14 billion of M&A and capital raising transactions for his clients. Prior to joining White, Weld & Co. Mr. Davis founded Barrington Capital Advisors, LLC, a research and advisory practice where he advised financial institutions, hedge funds and other small to medium sized businesses. Previously, he was a Vice President of both Business Development and Institutional Sales at The Receivables Exchange, a Bain Capital Ventures backed company. Prior to that, he was an investment banker in the Financial Institutions practice at Banc of America Securities, Credit Suisse First Boston (through its acquisition of Donaldson, Lufkin & Jenrette) and J.P. Morgan Securities.

View the video of Tyrese and Dr. Dre presumably celebrating the rumored transaction between Apple and Beats Electronics below.

RELATED: 3 Top Secret Weapons Apple Gets Buying Beats By Dre Listed By TheStreet

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