05/28/2014 05:30 EDT | Updated 07/28/2014 05:59 EDT

Apple confirms it's buying Dr. Dre's Beats for $3B US

Apple has confirmed it is buying Beats Music and Beats Electronics for $3 billion US, slightly less than the $3.2 billion that had been rumoured.

Streaming music service Beats Music and Beats Electronics, maker of the popular Beats headphones, speakers and audio software will become part of Apple by the end of September.

Beats Electronics co-founders Jimmy Iovine and Dr. Dre will join the company as full-time employees, but the brand will remain intact. Iovine will step down from Interscope Geffen A&M Records. 

The price consists of $2.6 billion in cash and $400 million in Apple stock that will vest over an unspecified time period. 

CEO Tim Cook says he likes the business Beats has built and wants to help it develop new products.

“We could build about anything that you could dream of. But that’s not the question,” he said. “The thing that Beats provides us is a headstart, and it provides us with incredible people, kindred spirits.”

While rivals such as Google and Facebook have been gobbling up companies, it is rare for Apple to make an acquisition of such size. The reduced price followed a period of due diligence by the tech giant.

Apple may be hoping the music subscription service will dovetail with iTunes and its iTunes Radio, at a time when sales growth for music downloads has stalled.

U.S. sales of downloaded songs slipped one per cent last year to $2.8 billion while streaming music revenue surged 39 per cent to $1.4 billion, as more music consumers turned to Spotify and Pandora.

“Music is such an important part of all our lives and holds a special place within our hearts at Apple,” Cook said in a statement. “That’s why we have kept investing in music and are bringing together these extraordinary teams so we can continue to create the most innovative music products and services in the world.”

Beats headphones have been top sellers in Apple stores, but will gain international exposure with its new parent company.

Apple is counting on the Beats acquisition to boost its cachet with teenagers and younger adults while trying to remain a leader in digital music — an industry that looks much different than when Apple reshaped the scene with the 2001 debut of the iPod.

"Apple suddenly has regained its cool," said Sony Music CEO Doug Morris, who was one of the first recording executives to embrace iTunes at Iovine's urging more than a decade ago.