Verizon said it has the grounds to withdraw from its acquisition of Yahoo’s problem-addled internet business, because of the latter’s massive data breach.

Verizon revealed in the summer that it would acquire Yahoo’s core business for just $4.83 billion (£3.86bn). It is worth remembering that Yahoo once had a market capitalisation of $125 billion.

Material Impact

In what will prove to be another headache for CEO Marissa Mayer, Verizon said it had a “reasonable basis” to believe Yahoo’s data breach of email accounts represents a material impact. This would allow it to walk away from deal.

The comments were made by Verizon’s general counsel Craig Silliman, speaking to reporters at a roundtable in Washington. He explained to Reuters that the data breach could trigger a clause in the deal that would allow Verizon not to complete the acquisition.

“I think we have a reasonable basis to believe right now that the impact is material and we’re looking to Yahoo to demonstrate to us the full impact,” Silliman was quoted as saying. “If they believe that it’s not then they’ll need to show us that.”

Silliman apparently declining to comment on whether talks are under way to renegotiate the purchase price.

Yahoo meanwhile indicated it would proceed as usual with the acquisition deal.

“We are confident in Yahoo’s value and we continue to work towards integration with Verizon,” a Yahoo spokesman was quoted as saying.

However, it seems that the takeover agreement does contain a clause that allows for Verizon to withdraw if a new event “reasonably can be expected to have a material adverse effect on the business, assets, properties, results of operation or financial condition of the business”.

Silliman told Reuters that Yahoo had had preliminary briefings from Yahoo, but it still needs “significant information” from the company before it makes a final decision.

It is understood that the acquisition has already been approved by the US Federal Trade Commission, but it still needs approval from the European Commission and the US Securities and Exchange Commission.

Silliman said Verizon is “absolutely evaluating (the breach) and will make determinations about whether and how to move forward with the deal based on our evaluation of the materiality”.

Data Breach

The devastating data breach at Yahoo actually happened back in 2014 and resulted in the theft of 500 million accounts. But the hack only came to light last month.

This long delay prompted US senators to call for CEO Mayer to explain the way the company handled the data loss.

It is thought that millions of Sky and BT broadband customers in the UK could be affected, as BT had used Yahoo Mail for its email service until 2013. Sky meanwhile still uses Yahoo for its email service.

Matters have not been helped after cybersecurity specialist Venafi warned that despite the hack occurring two years ago, Yahoo had still not implemented strong digital certificates.

Another cyber security firm InfoArmor meanwhile said that the hackers for an Eastern European criminal gang were responsible for the Yahoo data breach.

It should be noted that Yahoo has been hacked before. In 2012 Yahoo admitted it had been hacked, after more than 450,000 Yahoo passwords had been posted online.

Take our data breaches of 2015 quiz here!

Tom Jowitt

Tom Jowitt is a leading British tech freelancer and long standing contributor to Silicon UK. He is also a bit of a Lord of the Rings nut...

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