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Yahoo Agrees To $350M Price Cut To Keep Asset Sale To Verizon On Track

Deadline logo Deadline 2/21/2017 David Lieberman
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Yahoo agreed to shave up to $350 million from the deal to sell its assets to Verizon, and accept legal liabilities from previously reported hacking incidents, as a price to keep the agreement on track, the companies said this morning.

The new terms value the pact at $4.48 billion. The companies say they expect it to close in Q2.

In addition to the price cut, Yahoo is responsible for half of the cash liabilities from any non-SEC related investigations or third-party suits flowing from hacking incidents in 2013 (when more than 1 billion accounts were affected) and 2014 (hitting 500 million accounts).

Yahoo will be responsible for liabilities from shareholder suits or SEC investigations.

Verizon is buying Yahoo’s media and internet assets. But the existing corporate entity will continue to own investments in Alibaba Group and Yahoo Japan, along with convertible notes, and non-core patents, and operate under a new name: Altaba.

With the new terms, Verizon has agreed not to deem the data breaches or losses from them as a “Business Material Adverse Effect” that could scuttle the sale.

The sale “will accelerate Yahoo’s operating business especially on mobile, while effectively separating our Asian asset equity stakes,” CEO Marissa Mayer says. “It is an important step to unlock shareholder value for Yahoo, and we can now move forward with confidence and certainty.”

Verizon EVP of Product Innovation and New Businesses Marni Walden says the telco has “always believed this acquisition makes strategic sense. We look forward to moving ahead expeditiously so that we can quickly welcome Yahoo’s tremendous talent and assets into our expanding portfolio in the digital advertising space.”

Verizon already owns AOL. Yahoo will add more than 1 billion users, including at least 600 million mobile ones.

The Yahoo hacking reports led Verizon to wonder whether the quality of the assets The internet company said last month that it’s “working expeditiously to close the transaction as soon as practicable in Q2,” back from its original plan to wrap up the deal — originally pegged at $4.8 billion — by the end of March.

Verizon sought to cut the price of the deal it made in July after Yahoo disclosed the hacking incidents. They suggested that the assets might have more serious problems than the telco realized, and that it might be left with huge, unexpected legal bills.

Verizon CFO Matt Ellis told analysts in January that his company had “not reached any final conclusions yet” about whether it would go through with the deal under the original terms. Yahoo said that it was “working expeditiously to close the transaction as soon as practicable in Q2,” back from its original plan to wrap up the deal by the end of March.

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