Zipcar bought by Avis for $500M cash

Zipcar, the popular car-sharing service, will be bought by rental car company Avis in a cash deal worth nearly $500 million. The merger will help Zipcar meet high weekend demand and should boost Avis' earnings. 

Mike Segar/Reuters/File
The Zipcar.com logo is seen on a Mini Cooper car during a promotional event in New York's Times Square in this 2011 file photo. Car rental company Avis Budget Group Inc will buy Zipcar Inc for about $500 million in cash to join larger rivals in the fast-growing US car-sharing market.

 Avis is buying Zipcar for $491.2 million, expanding its offerings from traditional car rentals to car sharing services.

Car sharing has become a popular alternative to traditional rentals in metropolitan areas and on college campuses, allowing members to get a vehicle quickly for short trips. Zipcar, which was founded in 2000, has more than 760,000 members. It went public in 2011 and posted net income of $850,000 in the first nine months of this year.

"By combining with Zipcar, we will significantly increase our growth potential, both in the United States and internationally, and will position our company to better serve a greater variety of consumer and commercial transportation needs," said Avis Chairman and CEO Ronald Nelson.

Bringing the Avis fleet into play will help Zipcar meet high demand on weekends, Avis said, when most people make a run to the grocery store or run other errands. It will also help Avis compete with Hertz Global Holdings Inc., which has its own car sharing service, Hertz on Demand.

Both Zipcar and Hertz on Demand park cars throughout cities and college campuses, which allow renters to avoid waiting in lines at traditional car rental counters. Some areas provide reserved parking for the cars and vehicles can be located online or through the companies' smart phone applications.

The car sharing companies also pay for fuel, a cost not included in standard car rentals. Although the hourly rental options are quicker and cheaper than renting a car by the day, Zipcar and Hertz on Demand are generally more expensive for rentals longer than 24 hours.

Avis Budget Group Inc. will pay $12.25 per share, which is a 49 percent premium to Zipcar's closing price on Friday. The companies put the total value of the deal at approximately $500 million.

Zipcar Inc. has about 40.1 million outstanding shares, according to FactSet. It will become an Avis subsidiary and have headquarters in Boston.

Its shares jumped almost more than 47 percent to $12.19 in premarket trading Monday.

The boards of both companies unanimously approved the buyout. If Zipcar shareholders approve the deal, it's expected to close in the spring.

Avis anticipates $50 million to $70 million in annual savings. The Parsippany, N.J.-based company also expects the acquisition will add to its adjusted earnings per share in the second year after it is complete.

Avis said that it expects certain members of Zipcar management, including Chairman and CEO Scott Griffith and President and Chief Operating Officer Mark Norman, to help run its day-to-day operations.

Avis also maintained its 2012 adjusted earnings forecast Monday of about $2.35 to $2.45 per share on revenue of approximately $7.3 billion.

Analysts predict earnings of $2.42 per share on revenue of $7.3 billion.

You've read  of  free articles. Subscribe to continue.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.