Avis is set to acquire Zipcar for $491.2 million. This would expand its services from traditional car rentals to car sharing services. Car sharing has become one of the popular alternatives to rentals, especially in metropolitan areas and on college campuses. It allows members to quickly get a vehicle for trips. Zipcar has more than 760,000 members. It was founded in 2000 and gone public in 2011.
With Avis fleet, Zipcar can now meet the high demand on weekends. This is when most people go to the grocery or do other errands. According to Avis Chairman and CEO Ronald Nelson, combining with Zipcar will increase his company’s growth potential in the United States and across the globe. It will give Avis the opportunity to serve a broad range of consumer and commercial transportation requirements.
Avis Budget Group Inc. will pay $12.25 per share, which is 49 percent premium to Zipcar’s closing price last Friday. The companies said that the total value of the deal will be around $500 million. Zipcar Inc. has around 40.1 million outstanding shares.
Once the deal is completed, Zipcar will be an Avis subsidiary. Its headquarters will be in Boston. Its shares jumped more than 47 percent in premarket trading Monday. Boards of Avis and Zipcar approved the acquisition unanimously.
Avis said that some members of Zipcar management, including Chairman and CEO Scott Griffin and President and Chief Operating Officer Mark Norman, to help with the operations. Once Zipcar shareholders approve the deal, it will be completed as early as spring as long as everything goes according to plan.
Avis said that its 2012 adjusted earnings estimate remained at $2.35 to $2.45 per share with revenue of around $7.3 billion. Analysts have estimated the company’s earnings to be $2.42 per share with revenue of $7.3 billion.