Cyber attacks lead Yahoo to accept price cut on $4.8bn Verizon deal

Yahoo has agreed to take a price cut on the original $4.8bn sale of its core business to Verizon, marking one of the first times that the discovery of a cyber attack has resulted in revising an acquisition price, people involved in the negotiations said. After both sides struggled for months to assess the economic impact of the data breaches suffered by Yahoo, the California-based internet company and its telecom acquirer are close to agreeing a $300m discount, people briefed about the deal said. Those close to Verizon and Yahoo said that the companies’ management teams were determined to put the hacking crisis behind them and move ahead with a deal that many feared could collapse due to potential litigation risks linked to the data breach. After the Verizon deal was announced in July 2016, Yahoo disclosed two major incidents that affected more than 1bn users. Yahoo is also facing a probe by the US Securities and Exchange Commission into whether it had properly disclosed the issues. Yahoo shares initially jumped more than 2 per cent on the news, first reported by Bloomberg, while Verizon shares dipped 0.7 per cent. Yahoo insisted at its earnings in January that integration planning was proceeding with Verizon. Marissa Mayer, Yahoo chief executive, said the future looked bright for the internet company as she announced earnings and revenues that beat analysts’ expectations. The Verizon deal will be the conclusion of a long process that began shortly after Chinese ecommerce group Alibaba went public in September 2014. Investors had bought into Yahoo for its valuable stake in Alibaba and pushed it to find a way of releasing that value. Yahoo explored a way of spinning off the Alibaba stake into a holding company, but US tax authorities would not ensure that the transaction would be tax-free. Under pressure from activist investor Starboard Value, Yahoo then began to explore the spin-off or sale of the core business early last year, with Verizon emerging as the winner. Shortly after the deal was agreed in July 2016, Yahoo announced it had lost data relating to 500m accounts in a cyber attack. Late last year, when Verizon was already considering asking for a lower price because of potential lawsuits surrounding the data breach, Yahoo revealed another attack, this time affecting 1bn accounts.

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