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Verizon said to explore lower price or exit from Yahoo deal

Verizon Communications Inc. is exploring a price cut or possible exit from its $4.83 billion pending acquisition of Yahoo Inc., after the company reported a second major email hack affecting as many as 1 billion users, according to a person famil...

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A man walks past a Yahoo logo during the Mobile World Congress in Barcelona, Spain, February 24, 2016. REUTERS/Albert Gea/File Photo/File Photo

Verizon Communications Inc. is exploring a price cut or possible exit from its $4.83 billion pending acquisition of Yahoo Inc., after the company reported a second major email hack affecting as many as 1 billion users, according to a person familiar with the matter.

While a Verizon group led by AOL Chief Executive Officer Tim Armstrong is still focused on integration planning to get Yahoo up and running, another team, walled off from the rest, is reviewing the breach disclosures and the company's options, said the person, who asked not to be identified discussing private information.

A legal team led by Verizon General Counsel Craig Silliman is assessing the damage from the breaches and is working toward either killing the deal or renegotiating the Yahoo purchase at a lower price, the person said. One of the major objectives for Verizon is negotiating a separation from any future legal fallout from the breaches. Verizon is seeking to have Yahoo assume any lasting responsibility for the hack damage, the person said.

Yahoo shares fell as much as 6.5 percent to $38.25, the biggest intraday decline since February. Verizon rose less than 1 percent to $52.07.

User data from more than 1 billion accounts was stolen in August 2013, according to a Yahoo statement Wednesday, the second major breach the company has disclosed in the past three months. Given the severity of the hack, which included more than 150,000 U.S. government employees, Verizon is under pressure to reassess the value of the deal and appease shareholders who may see Yahoo as damaged goods.

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"As we've said all along, we will evaluate the situation as Yahoo continues its investigation," Verizon said Wednesday in an emailed statement. "We will review the impact of this new development before reaching any final conclusions."

In October, with slow progress and limited information available from the investigation, Silliman put Yahoo on notice, saying it was reasonable to assume the breach has had a material impact on the deal.

In the 2013 hack disclosed Wednesday, Yahoo said compromised user account information may have included names, email addresses, telephone numbers, dates of birth, passwords and, in some cases, encrypted or unencrypted security questions and answers. The company said it was notifying potentially affected users and had taken steps to secure their accounts.

Verizon has said that the deal, which is expected to close in the first quarter of 2017, still makes sense strategically. The company is hoping to expand beyond its wireless phone service by building a mobile media and advertising business and wants to work the billion or more Yahoo users into the fold.

For Yahoo Chief Executive Officer Marissa Mayer, the new hacks could weaken Yahoo's reputation with users who have been using its services for years and further tarnish its credibility ahead of the Verizon deal.

Hours after the disclosure Wednesday, a Yahoo user filed a class-action lawsuit against the Sunnyvale, California-based company.

"Yahoo failed, and continues to fail, to provide adequate protection of its users' personal and confidential information,'' New York consumer Amy Vail said in the lawsuit. "Yahoo users' personal and private information has been repeatedly compromised and remains vulnerable.''

Suzanne Philion, Yahoo spokeswoman, didn't respond to email and phone messages seeking comment on the suit.

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