Data provided by iNet BFA
Loading...
See More

Avis beats rivals to buy Zipcar

Jan 02 2013 18:46 Reuters


Related Articles

Wayne Duvenage resigns from Avis

Nedbank warns of car scam

New vehicle sales show modest growth

New state plan won't make cars cheaper

Toyota to release more hybrid cars

New vehicles still in demand

 
Bangalore - Car rental company Avis Budget Group Inc will buy Zipcar Inc for about $500m, surpassing larger rivals Hertz Global Holdings Inc and Enterprise Holdings Inc to become the number one player in the fast-growing US car-sharing market.

The offer of $12.25 per share in cash represents a premium of 49% to Zipcar's Monday close. Zipcar's shares were up 48.8% at $12.26 on the Nasdaq on Wednesday morning.

"We see car sharing as highly complementary to traditional car rental, with rapid growth potential and representing a scalable opportunity for us as a combined company," Avis chief executive Ronald Nelson said.

Zipcar controls about 75% of the $400m car-sharing industry in the United States. The total market is projected to reach $10bn over the next several years, Nelson said on a conference call with analysts.

Higher demand for car sharing in the face of rising gasoline prices has also attracted traditional car rental companies such as Hertz and Enterprise. 

Zipcar's business is at least five times larger than Hertz's and Enterprise's car-sharing businesses, Needham & Co analyst Kerry Rice said.

The deal will position Avis as the market leader in car-sharing services in the United States, he added.

Avis has been relegated to number three in the $22bn US car rental industry, after Hertz secured the number two spot with its acquisition of Dollar Thrifty Automotive Group in August. Avis also bid for Dollar Thrifty in 2010, but later dropped out of the race.

Zipcar, founded more than 10 years ago, pioneered car-sharing services in the US. Car sharing allows customers to rent cars at an hourly or daily rate and park in convenient reserved spots. Zipcar went public in April 2011 and raised about $174m.

Deal driver

The deal, expected to close in the spring of 2013, will add to Avis's earnings, excluding items, from the second year and is expected to generate between $50m and $70m in annual synergies.

Zipcar will operate as a unit of Avis and Scott Griffith will remain the unit's chief.

The company said it expects to fund the transaction primarily with available cash and additional debt. The company had cash and marketable securities of about $554m as of September 30.

Zipcar has more than 760 000 members, or Zipsters, with a presence in 20 cities in the US, Canada and Europe.

Citigroup is advising Avis while Morgan Stanley is advising Zipcar on the transaction.

Avis's shares were up 6 percent at $20.91 on the Nasdaq on Wednesday. Hertz shares were up 3% on the New York Stock Exchange.

Follow Fin24 on Twitter, Facebook, Google+ and Pinterest.

cars
NEXT ON FIN24X

 
 
 

Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
0 comments
Add your comment
Comment 0 characters remaining
 

Company Snapshot

We're talking about:

Small Business

A cash flow crunch often occurs in small businesses trying to balance cash coming in with cash going out. Watch this video to help you improve.
 
 

Savings survey not realistic

Fin24 readers respond to an in-house survey, which found that 60% of readers were confident that they would be financially comfortable in their retirement.

 
 

Start saving...

Time the key for retirement saving
Dummy's guide to saving
Save money with affordable account
All about endowments

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...
Loading...