(Anne Cusack / Los Angeles…)
In a bid to expand its breadth and adapt to changing consumer habits, the Avis car rental company announced a deal Monday to purchase car-sharing business Zipcar for about $500 million.
Zipcar Inc. has been growing as more people in urban areas forgo owning a car and instead tap car-sharing and hourly rental services when they need a vehicle. The company’s third-quarter sales grew 15% to $78.2 million while its membership (renters) grew 18% to more than 767,000. Zipcar earned $4.3 million in the three-month period and has said it expected 2012 to be the first full year for which it posts a profit.
"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, chief executive of Avis Budget Group. “We expect to apply Avis Budget's experience and efficiencies of fleet management with Zipcar's proven, customer-friendly technology to accelerate the growth of the Zipcar brand and to provide more options for Zipsters in more places.”
Avis Budget, the nation’s third-largest car rental company -- after Enterprise Holdings and Hertz -- will pay $12.25 a share in cash for Zipcar, a 49% premium over the stock's closing price Monday.
The deal is subject to approval by Zipcar shareholders and other customary closing conditions, but owners of 32% of Zipcar’s stock have already agreed to the transaction. It is scheduled to be completed in the spring.
“We believe this combination is a win across the board for our members, shareholders and employees,” said Zipcar CEO Scott Griffith. “We will be well positioned to accelerate enhancements to the Zipcar member experience with more offers and additional services as well as an expanded network of locations."
Avis believes it can whittle $50 million to $70 million of expenses out of the combined operations of the companies by eliminating duplication of functions such as the cost of maintaining Zipcar as a publicly traded company.
"Avis Budget's existing infrastructure, scale and experience with managing multiple brands make us uniquely positioned to accelerate the growth and profitability of Zipcar," said Nelson.
Griffith will continue to run Zipcar’s day-to-day operations. The car-sharing business operates in 20 major metropolitan areas in the United States, Canada and Europe and has cars at 300 college and university campuses.
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