The telecom giant of the US, Verizon has agreed for a deal with Yahoo to purchase its core internet business for a price with reduction of less than $350 million from the originally agreed price. Verizon stated that it would be purchasing the yahoo business for around $4.48 billion. Verizon considers mobile video as well as advertising as new revenues apart from the overcrowded telecom market of the US.
Yahoo disclosed two major cyber attacks
Yahoo had been hit by two major cyber attacks earlier and this agreement has left doubts for many. In December 2016, it was admitted by Yahoo that a large number of customer accounts of more than a billion was affected by a big cyber attack in the year 2013.
Also, Yahoo had admitted data breach of half a billion customers in the year 2014. As per the new deal, Verizon and Yahoo would jointly bear the cost of lawsuits due to data breaches. Verizon had purchased AOL for $4.4 billion in the year 2015 and now it wants to combine the AOL unit with Yahoo’s search, email, advertising technology tools and messenger.
Liabilities of both companies in the amended agreement
According to the new deal signed between Yahoo and Verizon, each company would be responsible for 50 percent of liabilities arising due to investigations by government and litigations by third party, related to the data breaches. However, only Yahoo will be held responsible for any of the liabilities arising due to shareholder lawsuits and investigations by Exchange Commission and Securities.
Executive vice president of Verizon Marni Walden said that the new agreement provides fair and favorable results for the shareholders, protection for both sides, and a clear path for closing the transaction in the 2nd quarter.
Apart from this, Verizon does not get any part of the stake of Yahoo in Alibaba, the Chinese online retailer.
Yahoo’s deal with Verizon is priced below Microsoft’s $44 billion offer in the year 2008 or the $125 billion worth during the dotcom boom. Thus, in this deal, Yahoo has sold its assets for a lesser amount after the incidents of cyber attacks. Beyond this, the company is also accepting legal liabilities arising due to data breaches that happened during the cyber attacks.
Verizon benefits with expansion in digital advertising
Media and internet assets of Yahoo are being sold to Verizon while Yahoo will continue its investments in Alibaba Group as well as Yahoo Japan. With this agreement, Verizon would get a chance to expand itself by adding more than 1 billion users, inclusive of minimum 600 million mobile users. Verizon stated that it welcomed the huge talent and assets of Yahoo that would lead to expanding its portfolio in digital advertising.
The price cut was sought from the original price fixed in July when Yahoo disclosed the two large cyber attacks. It was suggested that unexpected legal expenses would cause serious problems with the assets and hence, the price of the deal was reduced. Though Verizon informed its analysts in January not to reach at any final conclusions yet, Yahoo wants to close the transaction as soon as possible.
