Zipcar Sold to Avis Budget for $500 Million
By Antonio Perez On January 3, 2013 @ 12:38 am In Companies | No Comments
Car rental giant Avis Budget Group Inc. has reached an agreement to acquire car-sharing company Zipcar Inc. for around $500 million.
Avis’s all-cash offer of $12.25 per Zipcar share is 49 percent above its Dec. 31 close. The offer is 32 percent below Zipcar’s $18 per share IPO in April 2011.
The acquisition will propel Avis to the top of the car-sharing market, zipping past rivals Hertz Global Holdings Inc. and Enterprise Holdings Inc.
The car-sharing industry is a $400-million per year market and growing, and currently Zipcar is the leader with a 75 percent market share. Hertz and Enterprise recently started their own car-sharing programs for urban areas.
Zipcar, founded 10 years ago in Boston, pioneered the concept of car-sharing, which allows customers to rent cars for as little as an hour. The concept grew up of urban areas and university campuses where the population largely eschews car ownership and gained popularity during the financial crisis.
“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 Chairman and CEO Ronald Nelson said in a statement. “We expect to apply Avis Budget’s experience and efficiencies of fleet management with Zipcar’s proven, customer-friendly technology to accelerate the growth of the Zipcar brand.”
Zipcar, since its founding, has never turned an annual profit. It was projected to turn its first annual profit this year, of $4 million.
The company’s business model is sound, as its CEO Scott Griffith had argued in the past. But analysts say that the company lacks the scale and financial capital to finance customer and vehicle acquisition. Its current expansion into Europe is a good idea, but is nevertheless money-draining in a tough economic environment.
Nelson said on Wednesday that he envisions using Avis’s size, scale, and capital to help Zipcar growth and fulfill its expansion plans. The company also said that it plans to realize $50 to $70 million in synergies.
We see car sharing as highly complementary to traditional car rental.
— Avis Budget Group Chairman Ronald Nelson
The deal will generate a $96 million windfall for investor and AOL founder Steve Case, whose company Revolution owned roughly 19 percent of Zipcar as of Aug. 31, 2012.
Zipcar currently has 760,000 members, or Zipsters, as the company calls them. The board of the company has approved the deal, and as of Wednesday, it appears that there is enough shareholder support for the merger.
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