Verizon points to Yahoo breach deal impact

Verizon said on Thursday that it had a “reasonable basis” to believe that the massive data breach Yahoo disclosed last month has had a “material” impact on its deal to buy the company.

The telecommunications group is “looking to Yahoo to demonstrate to us the full impact” of the cyber attack, Craig Silliman, Verizon’s general counsel, said. “If they believe that it’s not (material) then they’ll need to show us that.”

The remarks from Mr Silliman come after Yahoo in September said at least 500m email accounts had been breached.

The cyber attack could disrupt the deal which some Yahoo shareholders have lobbied years to achieve, as they pushed chief executive Marissa Mayer to find a way to separate the core Yahoo business, which she has not yet turned round, from its much more valuable stake in Chinese ecommerce company Alibaba.

A Yahoo spokesperson said the company remained “confident” in its value, and continues to “work towards integration with Verizon”.

The deal with Verizon this summer came after months of talks about selling Yahoo under pressure from activist investor Starboard Value, which won seats on the board after vocal criticism of Ms Mayer.

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Verizon agreed to pay $4.8bn for the core business, which includes Mail, Fantasy Football and all Yahoo’s other apps and sites, despite some analysts valuing the core at less than zero.

Yahoo and Verizon have been intensely discussing how to best address the data breach, which became public only weeks after the telecoms company agreed to acquire the California-based group.

People with knowledge of the discussion said that talks have been tense, as Verizon executives felt they had been kept in the dark about a data breach they suspected Yahoo was aware of before the deal was agreed. Yahoo has contended that it discovered the problem after the deal was signed.

Verizon has been studying how to alter the terms of the deal and one person said that all options were on the table.

Although Verizon is unlikely to walk away from the pact, its lawyers have looked into whether it would be allowed to do so, said people familiar with the situation.

These people added that it was not clear at the moment whether Verizon could kill the deal on the basis of the data breach.

One person close to Verizon said that it was highly likely that the company would ask for a discount but no decision on the matter had been taken.

The breach, which Yahoo has blamed on a state-sponsored actor, is the largest ever cyber attack. Yahoo has come under pressure from lawmakers to explain why it went undiscovered for almost two years, as the attacker entered the network in December 2014.

One senator has called on the Securities and Exchange Commission to investigate whether Yahoo fulfilled its obligations to inform the public and investors as soon as possible.

Yahoo has also been accused of building custom software to scan emails on behalf of a US government agency, in a report by Reuters earlier this month.

Yahoo shares fell 1.8 per cent in New York on Thursday, while Verizon’s were little changed.

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