Report: Verizon could ditch $4.8B Yahoo deal
Yahoo shares tumbled more than 5% Thursday on a report that Verizon is reconsidering its $4.83 billion deal to acquire the embattled Internet company.
Bloomberg, citing people familiar with the matter, said Verizon is reconsidering the deal, or could bargain down the price, on the heels of yet another massive computer breach at Yahoo, disclosed late Wednesday. Y
ahoo said a breach in August 2013 may have led to the theft of data from more than 1 billion user accounts.
The FBI is investigating the matter, the White House acknowledged.
A Yahoo spokesman said the company remains confident in its value and continues to work towards integration with Verizon.
“As we’ve said all along, we will evaluate the situation as Yahoo continues its investigation,” Verizon spokesman Bob Varettoni said in a statement to USA TODAY on Wednesday, following news of the 1-billion account breach. “We will review the impact of this new development before reaching any final conclusions.”
The latest digital intrusion, on top of a 500-million account break-in disclosed in September, could give Verizon pause on consummating the mega-merger, say industry analysts.
Although Verizon “still sees a strong fit” for Yahoo within its digital strategy, whether Verizon can find a way to extricate itself from liability associated with the latest hack or agree to a discounted acquisition price, is unclear, says Ken Sena, an analyst at investment bank Evercore ISI.
“(Verizon reportedly sought) a $1 billion price concession for the Russian hack of 500 million accounts,” says John Colley, a professor at Warwick Business School in the United Kingdom, alluding to misgivings from Verizon general counsel Craig Silliman in October.
“This ‘new’ hack appears more damaging still. Aborting the deal may be the best option for Verizon as many shareholders have doubts about their social media strategy. Acquiring ‘damaged goods’ is not going to help,” he says.
Cybersecurity issues aside, Verizon is taking on a company facing steep challenges. Yahoo’s slice of worldwide digital advertising is shrinking because Google, Face- book, Alibaba and others are growing significantly faster.
Yahoo’s ad revenue is expected to grow to $3 billion, but its market share is expected to drop to 1.3%, according to new data from eMarketer.
A damaged deal could also boomerang Yahoo executives.
“Such disclosure, taking into consideration the unclear and even suspicious disclosure timeline, just before the buyout, may provide a valid reason for Yahoo’s shareholders to sue Yahoo’s top management if the deal fails or brings less money than expected,” says Ilia Kolochenko, CEO of web security firm High-Tech Bridge.