The Hindu Business Line
Yahoo! under scrutiny after hack; Verizon seeks new deal terms
Wireless carrier looking for ‘major concessions’
Yahoo! Inc came under renewed scrutiny by federal investigators and lawmakers on Thursday after disclosing the largest known data breach in history, prompting Verizon Communications Inc to demand better terms for its planned purchase of Yahoo!’s internet business.
Verizon, which agreed to buy Yahoo!’s core internet business in July for $4.8 billion, is now trying to persuade Yahoo! to amend the terms of the acquisition agreement to reflect the economic damage from the two hacks, according to people familiar with the matter.
The US No. 1 wireless carrier still expects to go through with the deal, but is looking for “major concessions” in light of the most recent breach, according to another person familiar with the situation.
Asked about the status of the deal, a Yahoo! spokesperson said: “We are confident in Yahoo!’s value and we continue to work towards integration with Verizon.”
Verizon had already said in October it was reviewing the deal after September’s breach disclosure. Late on Wednesday, it said it would “review the impact of this new development before reaching any final conclusions” about whether to proceed.
The company declined to comment beyond that statement on Thursday.
May approach court
Verizon has threatened to go to court to get out of the deal if it is not repriced, citing a material adverse effect, said the people familiar with the matter, who asked not to be identified because the negotiations are confidential.
No court in Delaware, where Yahoo! is incorporated, has ever found that a material adverse effect has occurred that would allow companies to terminate a merger agreement.
Nevertheless, the threat of a court case on the issue hasbeen successfully used by companies to renegotiate deals, and experts said that some concessions from Yahoo! are likely, given the magnitude of the cyber security breaches.
Renegotiating the deal’s price tag would be the simplest butalso least likely scenario because the impact of the data breaches will not be apparent for some time, according to Erik Gordon, a professor at the University of Michigan’s Ross School of Business.
A more likely concession would be for Yahoo! to agree to compensate Verizon after the close of the deal, based on the liabilities that occur.
The two companies may also agree to extend the close of the deal to allow for more time for information to come in on the impact of the breaches, Gordon suggested.