After a growing through a string of acquisitions and mergers, ride-sharing leader Zipcar is now the company being acquired. Car rental giant Avis Budget Group said it is buying Zipcar for $500 million in cash or $12.25 per share, a 49 percent premium over Zipcar’s share price on Dec. 31.
The deal, which is expected to close in Spring 2013, allows Avis to get into the growing car-sharing market and gives Zipcar a big backer, which can help it grow and make it more efficient. Avis said it can achieve annual cost savings of $50 to $70 million for Zipcar by relying on its expertise in fleet procurement, operations and maintenance as well by increasing fleet utilization between the two companies.
For example, Avis can provide extra cars to Zipcar on the weekends when supply is constrained. Avis said it expects the deal will be accretive by the second year. Zipcar will also be able to offer more deals and open up new locations as part of the acquisition, said Zipcar Chairman and CEO Scott Griffith.
“By combining Zipcar’s expertise in on-demand mobility with Avis Budget Group’s expertise in global fleet operations and vast global network, we will be able to accelerate the revolution we began in personal mobility,” Griffith said in a statement.
Zipcar is the leader in the car-sharing market with more than 760,000 members in 20 major metropolitan areas in the United States, Canada and Europe. It will operate as a subsidiary of Avis Budget Group, with Griffith and Mark Norman, president and chief operating officer set to continue leading the company.
Ronald L. Nelson, Avis Budget Group chairman and CEO said car-sharing represents a big growth opportunity for Avis and is complementary to traditional car rentals. He said he wants to continue the Zipcar brand but will utilize Zipcar’s technology to offer more options under the Avis and Budget brands. Avis in 2011 launched Avis on Location, a corporate car-rental service that allowed enterprise clients rent by the hour. The Zipcar deal is a big bet by Avis, which will use most of its $554 million in cash and securities to buy Zipcar, which also has $82 million in cash and securities.
Zipcar debuted in 2000 in Cambridge, Mass., and grew through acquisitions and mergers including a deal with Flexcar in 2007. More recently, it has expanded in Europe through the acquisitions of Streetcar in the U.K. and Carsharing.at in Austria. It has also taken a majority stake in Barcelona-based Avancar. The company went public in 2011 and hit a market value of $1.2 billion after its stock price zoomed to $30 a share. But the stock price has steadily declined since and has hovered at less than $10 a share since August. The company, however, was looking ahead to brighter days after its third-quarter earnings report in November, when Griffith said Zipcar was on track to have its first year of profitability in fiscal 2012. The deal comes as Zipcar faces more competition from car sharing startups such as GetAround and RelayRides.