VZ Verizon Communications Inc

By Ryan Knutson and Deepa Seetharaman 

Verizon Communications Inc. and Yahoo Inc. are closing in on a revised deal that would reduce the price Verizon would pay for the internet company's core business by about $300 million, people familiar with the matter said.

The two companies also are discussing an agreement to share any future liabilities as a result of two massive data breaches Yahoo disclosed after the companies struck their original $4.8 billion deal in July, people familiar with the matter said.

An agreement could come even though Verizon's investigation into the breaches isn't complete, one of the people said. Executives at the telecommunications company want to move forward despite some remaining uncertainty to get to work on integrating Yahoo with its AOL unit, the person said.

Separately, Yahoo said it is notifying users this week whose accounts it believes were compromised over the past two years by hackers forging digital files called cookies. That episode, first disclosed in December, is in addition to the two big data breaches. Yahoo didn't say how many users it is notifying.

The two sides could agree on a revised transaction within a week, which would allow the deal to close in April, people familiar with the matter said. But an investigation under way at the Securities and Exchange Commission about what Yahoo knew about the data breaches and when, and whether it properly informed investors, could slow that timeline. Before Yahoo can schedule a shareholder vote on the deal, it needs the SEC to approve its proxy statement.

Investors remain optimistic the deal will go through. Shares of Yahoo gained 1.4% to $45.65 on Wednesday, after CNBC earlier in the day reported the two sides were near a revised agreement.

In addition to concerns about damage to Yahoo's brand, Verizon believes some of Yahoo's systems have been compromised by the data breaches and will be difficult, if not impossible, to integrate with AOL, one of the people said.

In September, Yahoo disclosed a massive breach that took place in 2014 and affected more than 500 million accounts. The stolen data included names, email addresses, dates of birth, telephone numbers and encrypted passwords, Yahoo said.

By November, Verizon said it believed the breach didn't harm user engagement and was prepared to move forward with an agreement to share future liabilities from the hack, people familiar with the matter said. Then in mid-December, Yahoo said it was hit with a different data breach in 2013 that compromised private information of more than one billion user accounts.

After the second disclosure, Verizon conducted its own brand studies and had deeper technical conversations with Yahoo about its systems, one of the people said.

By agreeing to close the deal, Verizon would give up its right to sue over the idea that Yahoo had covered up the hacks, one of the people said.

If the deal goes through, the remaining company would be called Altaba Inc. and contain Yahoo's stake in Alibaba Group Holding Ltd. and Yahoo Japan.

Write to Ryan Knutson at ryan.knutson@wsj.com and Deepa Seetharaman at Deepa.Seetharaman@wsj.com

(END) Dow Jones Newswires

February 16, 2017 02:47 ET (07:47 GMT)

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