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

“Music is such an important part of all of our lives and holds a special place within our hearts at Apple,” said Tim Cook, Apple’s chief executive 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.”

Apple suddenly has regained its cool

The deal is expected to close in the fiscal fourth-quarter.

With US$1.1 billion in revenue last year, Beats is already making money and will boost Apple’s earnings once the new fiscal year begins in October, Cook said in an interview with The Associated Press.

“We have known these guys forever,” Cook said of Iovine and Dre. “We’ve dated, we’ve gone steady and now we are getting married. This relationship started a decade ago, so we know there is an incredible cultural fit. These two guys have a very rare set of skills. It’s like finding a particular grain of sand on the beach. It’s that rare.”

Sharing a laugh with Jimmy, Dre, and @cue. Excited to welcome the #Beats team to #Apple. It’s all about the music. pic.twitter.com/ZwyWgHFwhO — Tim Cook (@tim_cook) May 28, 2014

Iovine, 61, and Dre, 49, will both become key executives in Apple’s music divisions, though Cook said their roles haven’t been determined yet. Cook said Beats’ music streaming service was the main selling point in the deal.

The growing popularity of music streaming services such as Pandora and Spotify has been reducing sales of songs and albums, a business that iTunes has dominated for the past decade. U.S. sales of downloaded songs slipped 1% last year to US$2.8 billion while streaming music revenue surged 39% to US$1.4 billion, according to the Recording Industry Association of America.