Yahoo's massive email breach of at least 500 million accounts could give Verizon a reasonable basis to back out of its Yahoo acquisition, and Big Red is reportedly rethinking the deal.
Just earlier this week, Verizon chairman and CEO Lowel McAdam defended the Yahoo deal despite the massive hack, saying that Yahoo is still a "real value asset." Nevertheless, it now seems that Verizon may be looking to back out of the deal after all.
Big Red's lawyers argue that the controversial Yahoo data breach might affect Verizon's acquisition of Yahoo.
"Verizon Corp's (VZ.N) general counsel, Craig Silliman, said on Thursday the company has a "reasonable basis" to believe that Yahoo Inc's (YHOO.O) massive data breach of at least 500 million email accounts represents a material impact that could allow Verizon to withdraw from its $4.83 billion deal to buy Yahoo," Reuters reports.
In other words, the Yahoo email breach that could translate to material impact could trigger a clause to void the deal, allowing Verizon to withdraw from the acquisition.
As a reminder, Verizon bought AOL for $4.4 billion in June 2015 and offered to acquire Yahoo for $4.8 billion in July this year. The plan was to merge the two entities and form a digital advertising behemoth to take on Facebook and Google, but the Yahoo deal is yet to close.
Back in September, it came to light that Yahoo was hacked in 2014 in what is considered the biggest data breach in history, with the data of 500 million Yahoo users ending up for sale on the dark web. Yahoo went under fire and is facing lawsuits of gross negligence, accusing the company of failing to secure customer data.
In light of the whole Yahoo scandal, Verizon reportedly sought a $1 billion discount on its proposed Yahoo acquisition, offering to pay $3.8 billion instead of the previous $4.8 billion for the company following news of the data breach.
Based on the latest report from Reuters, the Verizon - Yahoo deal now seems even more uncertain. Silliman's statement indicates that Verizon is looking to Yahoo to prove the email breach would not have material consequences on the acquisition, but it remains to be seen whether Yahoo will be able to prove it.
If the material impact is big enough to warrant Verizon to back out of the deal, Yahoo's future may be more uncertain than ever. No other information is available at this point, but it will be interesting to see how things will pan out. As always, we'll keep you updates as soon as more details come to light.