Tag Archives: Yahoo

Verizon Says Yahoo Privacy Breach Could Impact Deal

In what may be considered confirmation of earlier rumors, Verizon Communications Inc has indicated that recent revelation of a massive data breach at Yahoo may cause it to request renegotiation of the deal it has to buy the Internet company.

The telecoms giant’s legal representative, Craig Siliman, said at a meeting in the company’s offices in Washington on Thursday that it was normal for the deal to be impacted if the data breach is considered of much consequence.

“I think we have a reasonable basis to believe right now that the impact is material and we’re looking to Yahoo to demonstrate to us the full impact,” the Verizon general counsel said. “If they believe that it’s not then they’ll need to show us that.”

Siliman said the US’ largest wireless communications service provider has been reviewing the breach to enable it determine whether it was material to affect the deal.


In July, Verizon agreed to acquire the core business of Yahoo for $4.8 billion after coming tops in a prolonged auction. The acquisition was scheduled to be wrapped up by the end of March.

But the popular email service provider has made the news for all the wrong reasons in recent weeks. Last month, it revealed for the first time a massive hacking incident that took place in 2014 in which sensitive information, including names, date of births, passwords and security questions, of around 500 million users was stolen.

Yahoo said the hacking incident, which ranks among the largest private data thefts ever, was discovered in July. It said in September that it believed the hackers were state-sponsored, although it did not reveal the country that was responsible.

The Internet company failed to inform Verizon about the breach until September – a decision which expectedly infuriated the carrier. This led to earlier reports that Verizon might request a discount.

Merger agreements often contain provisions that allow buyers to withdraw from agreed deals under certain conditions. The BBC reports that a clause in the agreement with Yahoo allows Verizon to withdraw from the deal if an event is considered reasonably capable of producing “a material adverse effect on the business.”

However, experts in business law say it is difficult to enforce material adverse effect clauses. Courts have at times disallowed their use.

The request by Hexion Specialty Chemical to withdraw from an acquisition deal for Huntsman Corp., following slump in the latter’s earnings, was thrown out by a Delaware court in 2007, according to the Wall Street Journal. But Cerberus was able to walk away from a deal to buy Innkeepers in 2011 and eventually agreed a deal $100 million lower than the initial one.

Verizon CEO Lowell McAdam disclosed earlier this week that the telecoms giant did not intend withdrawing from the deal yet. But he suggested a renegotiation of terms will be needed for the acquisition to be finalized.

The carrier plans to combine Yahoo and AOL, which it acquired last year, to enable it compete for online advertising dollars with heavyweights such as Google and Facebook.

“We are confident in Yahoo’s value and we continue to work towards integration with Verizon,” a spokeswoman for Yahoo said.

Sources told the Wall Street Journal integration planning is still ongoing between the two companies.