Zipcar Extends Option to Buy Up Majority of Avancar


Car sharing company Zipcar had until the end of 2010 (Dec. 31) to decide if it wanted to buy the majority share of Spanish car sharing company Avancar, which it invested $300,000 in for a minority share in late 2009. Now that it’s 2011, what’s the answer? Well, they still haven’t decided. This morning, Zipcar says it has extended the option to buy the majority of Avancar for another year (until Dec. 31 2011), and has instead given Avancar a loan that can convert into equity if Zipcar decides to buy the majority of Avancar later this year.

What’s the deal? Here’s my speculation: Zipcar is in a period of flux. The company has been planning to raise $75 million in an IPO since the summer, but then also recently raised $21 million in a Series G financing round. Companies usually don’t raise money and then IPO back to back. Zipcar needs several more months in 2011 to figure out its best path forward for financing, growth and expansion.

It’s expensive to be a car sharing company, given the cost of operating Zipcar’s over 8,000 vehicles in its network is high. According to its most recent amendment to its S1, Zipcar generated $133.99 million in revenues for the first nine months of 2010, ending Sept. 30, but lost $13.08 million over that same period. It’s been difficult for Zipcar to generate a profit with such high operating costs.

Adding cars to the fleet just adds more costs. That’s one of the ideas behind expanding via acquisition. If Zipcar can get good enough deals to buy up car sharing companies in new regions (or competitors) perhaps it can grow at a cheaper rate than doing it organically. Zipcar paid the equivalent of $62 million in April 2010 for London-based Streetcar to expand into the U.K. Spanish Avancar is still small, but clearly Zipcar thinks the terms are good enough to extend them for another year.

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Gabriel Herrero-Beaumont

It seems that Zipcar and the Cicar company have already reached an agreement on the trademark issue…

Gabriel Herrero-Beaumont

are there any carsharing operators having remarkable succes growing organically outside their own country?? the carsharing business is such a local business!!

The Cicar thing is incredible…

Kevin McLaughlin

I would agree – Zipcar can’t pull the trigger until they can pay with (liquid) shares, not cash. They have been unable to grow organically outside of the USA (in any meaningful way), so theirs will be growth-through-acquisition. BUT it is also interesting to note that they have been unable to establish a class 39 trademark in Spain (due to a local company, Cicar, having a similar sounding name in Spanish).

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