Verizon had been widely reported to be interested in acquiring Yahoo, but it appears that a possible deal now hangs on an agreement of a discounted price with the popular Internet company.
People familiar with the matter told the New York Post that the leading telecommunications company now wants a slash of about $1 billion off the price agreed for the proposed Yahoo acquisition. This follows recent reports of hacking and privacy breaches by the popular email service provider.
The acquisition deal was originally valued at $4.83 billion.
Two weeks ago, Yahoo revealed for the first time a hacking incident that had occurred in 2014. Names and passwords associated to at least 500 million accounts were estimated to have been stolen in that incident. The breach, which also possibly gave hackers access to users’ telephone numbers and even security questions and answers among others, is considered one of the largest-scale ever.
The company was again in the spotlight few days ago when reports emerged that it had built a program to scan through all of its customers’ incoming emails for U.S. intelligence agencies. It did so in compliance with an order by a secret Foreign Intelligence Surveillance Court to detect signatures used by terrorists.
Verizon has plans to combine its subsidiary AOL with Yahoo to enable it compete more favorably against heavyweights, such as Google and Facebook, who get the bulk of digital advertising dollars. But it now feels that the value of Yahoo has reduced as a result of the recent scandals and, as such, desires a discount, sources say.
AOL CEO Tim Armstrong is believed to be displeased about lack of disclosure on the hack. He also appears to be ready for a Verizon pullout from the acquisition deal.
“In the last day, we’ve heard that Tim is getting cold feet,” a source told the New York Post. “He’s pretty upset about the lack of disclosure and he’s saying can we get out of this or can we reduce the price?”
One of the sources revealed that Armstrong flew to the West Coast few days ago to pitch a case for a price reduction to Yahoo executives. But the Internet company is said to be against any move to reduce the $4.83 billion agreed in July, saying a legal deal was agreed by the parties and the terms cannot now be changed.
Discussions on a possible price cut are ongoing. The requested discount is very likely to be discussed at the next board meeting of Yahoo holding in about two weeks’ time.
Speaking to the CNBC on Wednesday, Yahoo’s former interim Chief Executive Ross Levinsohn seemed to support the request by Verizon for a discounted price. He said it made sense from a business standpoint.
The combined Yahoo-AOL user base will stand at about one billion in the event of a deal being concluded in the first quarter, the NY Post reports. Verizon’s target is for this to increase to two billion by 2020.
Full integration of AOL into Verizon has yet to be completed several months after its acquisition by the telecom giant.