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| This July 19, 2016 photo shows a Yahoo sign at the company's headquarters in Sunnyvale, Calif. On Wednesday, Dec. 14, 2016, Yahoo said it believes hackers stole data from more than one billion user accounts in August 2013. (AP Phot o / Marcio Jose Sanchez) |
NEW YORK - 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 .
Shares of the Sunnyvale, California-based internet pioneer fell more than 6 percent after it announced the breach of data belonging to more than 1 billion users late on Wednesday, following another large hack reported in September .
Shares of Yahoo fell more than 6% after it announced the breach of data belonging to more than 1 billion users Wednesday
Verizon, which agreed to buy Yahoo's core internet business in July for US$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.
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 has been 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 but also 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.
Verizon shares rose 0.4 percent to close at US$51.81, in line with the S&P 500 Index. Yahoo closed down 6.1 percent at US$38.41.
