The fledgling audio-products company is now in talks with an investor that could provide debt financing and possibly take a minority ownership stake in the coming weeks, the people familiar with the matter said. Beats also hopes to buy out struggling Taiwanese smartphone maker HTC Corp.'s 2498.TW -0.65% 25% stake in the company.
Beats officials declined to disclose details of the upcoming investment, including the identity of the new investor. An HTC spokeswoman wouldn't comment on whether HTC plans to sell its stake in Beats.
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Two years ago, Mr. Iovine and Dr. Dre sold a 50.1% stake in Beats Electronics to HTC for around $300 million, to only a year later buy half of that back for around $150 million—a discount given Beats' substantial growth in the intervening months.
HTC incorporated audio software from Beats into a line of phones, and other phones were bundled with Beats headphones. HTC last year also provided Beats with a one-year, $225 million loan that was secured by all of Beats' assets, according to HTC's annual report.
That loan was recently replaced with an interim loan that is due in July 2014, according to an early August report from credit ratings firm Standard & Poor's, which said Beats still needs to develop "a viable refinancing plan" in the coming months.
HTC's fortunes faded amid tougher competition in the smartphone market from companies like Samsung Electronics Co. 005930.SE -0.69% HTC's shares have lost nearly 90% of their value since April 2011, when HTC was second only to Apple in U.S. smartphone sales.
While HTC originally saw Beats as a way to court the youth market, the collaboration ended up souring with differences in opinion on strategy, said a person with knowledge of the partnership.
Earlier this year, Beats approached HTC about selling its remaining stake, according to a person familiar with the matter.