Yahoo salvages Verizon deal by cutting sale price
Yahoo Inc. is taking a $350-million hit on its previously announced $4.8-billion sale to Verizon Communications Inc. in a concession for security lapses that exposed personal information stored in more than 1 billion Yahoo user accounts.
The revised agreement announced Tuesday eases investor worries that Verizon would demand a discount of at least $1 billion or cancel the deal entirely.
The hacking bombshells, disclosed after the two companies agreed on a sale, represent the two biggest security breaches in Internet history. The breaches raised concerns that people might decrease their usage of Yahoo email and other digital services that Verizon is buying. A smaller audience makes Yahoo’s services less valuable because it reduces the opportunities to show ads — the main reason that Verizon struck the deal seven months ago.
Yahoo, based in Sunnyvale, Calif., has maintained that its users have remained loyal, despite any mistrust that might have been caused by its lax security and the lengthy delay in discovering and disclosing the hacks. The separate attacks occurred in 2013 and 2014; Yahoo disclosed them last September and December.
The lower sale price, now pegged at $4.48 billion, will cost Yahoo shareholders about 37 cents a share. They may also be responsible for substantial legal costs.
What’s left of Yahoo after the deal closes — an entity that will be called Altaba Inc. and have stakes in Chinese e-commerce giant Alibaba Group and Yahoo Japan — will be responsible for liabilities stemming from shareholder lawsuits and from the Securities and Exchange Commission investigation of Yahoo. Verizon and Altaba will split costs from
all other hack-related lawsuits and government investigations.
This agreement “provides protections for both sides” and should help the deal close by the end of June, Marni Walden, Verizon’s head of product innovation and new businesses, said in a statement. Yahoo shareholders have yet to approve it.
Avoiding an even larger reduction in the deal value represents a small victory for Yahoo Chief Executive Marissa Mayer, who had already been under fire on Wall Street for her inability to turn around the company and then for the security lapses that came under her watch. Mayer is widely expected to step down after Verizon takes over, although she hasn’t spelled out her plans definitively.
On Tuesday, Yahoo shares rose 40 cents to close at $45.50, and Verizon’s stock rose 24 cents to finish at $49.43.