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Avis To Buy Zipcar for $500 Million
January 2, 2013
Rental car group Avis Budget announced it has agreed to terms for the purchase of Zipcar. Founded ten years ago, Zipcar is a pioneer in the car-sharing industry, which gives members regular access to vehicles without the hassles, expenses and environmental impacts of individual ownership.
With more than 760,000 members and over 10,000 vehicles in urban areas and college campuses throughout the United States, Canada, the United Kingdom, Spain and Austria, Zipcar is said to be the largest car-sharing company. However, it faces increasing competition from larger, more established car-rental companies that began offering short-term rentals in response to the economic downturn that began in 2008.
According to Avis Budget, car sharing has grown to be a nearly $400 million business in the United States and is expanding rapidly in major cities around the world. The rental car group agreed to pay $12.25 per share in cash for Zipcar, a 49 percent premium over the company’s closing price on December 31, 2012, representing a total transaction value of approximately $500 million. The acquisition is expected to be completed in the spring of 2013.
Avis Budget said it intends to preserve and grow the Zipcar brand. "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,” said Ronald L. Nelson, Avis Budget Group chairman and CEO. He added that Avis Budget also will leverage Zipcar's technology to expand mobility solutions under the Avis and Budget brands.
Avis Budget said it can achieve substantial cost savings by increasing fleet utilization across the two companies. For instance, Avis Budget's fleet can be used to meet more of Zipcar's weekend demand, which is currently constrained by fleet availability. Avis Budget expects to generate $50 to $70 million in annual synergies as a result of the acquisition.
Jack Kaumo from ZipCar gave a video interview at the Sustainable Brands '12 conference in San Diego, discussing the birth and growth of car-sharing.
@Bart_King is a freelance writer and communications consultant.