Yahoo’s non-disclosure of hack is material enough to derail its acquisition – Verizon’s

Yahoo has not made public the timeline for the hack despite several shoves to do so by senators. Furthermore, although it has pointed at a state-actor for the incident, private cyber security experts have frowned on these assertions. It would appear that Yahoo has not given the full disclosure regarding this hacking incident.

In a development that is likely to have an impact on Yahoo, Verizon Communications Inc. has disclosed that it has a “reasonable basis” to believe that Yahoo Inc.’s massive data breach of email accounts represents a material impact which could lead it to withdraw from the race to acquire the tech company.

According to Verizon’s general counsel, Craig Silliman, the data breach could lead to a clause in the deal which could result in Verizon not completing the deal.

“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. If they believe that it’s not then they’ll need to show us that,” said Silliman while declining to comment whether talks are underway to renegotiate the purchase price.

When asked to comment on this development, Yahoo’s spokesman said: “We are confident in Yahoo’s value and we continue to work towards integration with Verizon.”

According to a clause in the deal, Verizon can withdraw from it if it “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 went on to add that although the U.S. Federal Trade Commission has approved its planned acquisition of Yahoo, the same needs to be got from the U.S. Securities and Exchange Commission who is reviewing its proxy and the European Commission.

Although Verizon has had preliminary briefings from Yahoo it still needs “significant information” from the company before it can make a final call on the matter. The hacking incident which breached more than 500 million e-mail is weighing on Verizon’s mind.

As per Silliman, 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.”

Earlier Yahoo had said the cyberattack was “state-sponsored”. Private security experts have however challenged this assertion. A couple of Democratic senators have pressed Yahoo for more information about the hack and why it took it so long to discover it.

So far Yahoo has disclosed that it learned about the breach only this summer while investigating claims of a separate intrusion. It has not provided a specific timeline for the events.

Analysts have alluded Verizon’s posturing as trying to get a better price for the acquisition.

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