Cleveland Cavaliers LeBron James and recording artist Dr. Dre (L)
Cleveland Cavaliers LeBron James and recording artist Dr. Dre (L) Reuters

iPhone maker Apple is set to buy premium headphones maker and music streaming service Beats Electronics for $3.2 billion (£1.89bn, €2.3bn) - which would make it the biggest acquisition in the company's history.

Reports of the acquisition, which could be announced as soon as next week, originated in the Financial Times, but has been confirmed by sources speaking to multiple publications since the original report was published.

The deal would be Apple's largest acquisition ever, and it dwarfs the iPhone maker's $404m acquisition of computer company NeXT in 1996. Beats was valued at $1bn eight months ago, when Carlyle Group took a minority stake in the company for $500m.

Beats Electronics was founded by rapper-turned-businessman Dr. Dre and music producer Jimmy Iovine in 2008. In addition to headphones, the company launched a music streaming service earlier this year.

The Financial Times report, citing sources with knowledge of the matter, said the deal would be announced as early as next week, but it could still fall apart as some details had yet to be agreed.

Apple will acquire Beats' streaming music service and its audio equipment business, which includes its brand of headphones and audio equipment, the FT said. The Beats management team will also report to Apple CEO Tim Cook.

Apple has just short of $159bn in cash reserves according to its latest financial statement, and Cook noted that the company has no problem "spending 10 figures for the right company, for the right fit that's in the best interest of Apple in the long-term".

Steve Jobs, the late founder of Apple, had revolutionised the music industry with the launch of iTunes in conjunction with the launch of the iPod.

The popularity of the iPod has faded significantly in recent years as smartphones such as the iPhone has replace all of the iPod's features.

Beats' music streaming service will strengthen Apple's iTunes Radio against rivals such as Spotify and Pandora.

The company is also expected to benefit from Beats' leading audio equipment division. Beats has a 57% market share in the premium headphone market.