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Avis Buying Zipcar in $500M Deal, Shares Jump

It gives Avis a strong presence in the growing hourly rental market


Auto CarsThe Avis Budget Group (NASDAQ:CAR) will be moving into the hourly car-rental market.

The company announced on Wednesday that it will purchase Zipcar (NASDAQ:ZIP) for $12.25 a share, a 49% premium over its prior closing price. That values the all-cash acquisition at $500 million, The New York Times noted.

Home Rental Operator Hits IPO Market
Home Rental Operator Hits IPO Market

Predictably, shares of Zipcar soared 48% in Wednesday morning trading to over $12 a share, while Avis Budget shares surged more than 5%.

Zipcar, which provides hourly car rentals in 20 cities, caters to a younger, urban demographic, compared to Avis Budget’s traditional car-rental business. But competitors like Hertz (NYSE:HTZ) and privately held Enterprise have entered the hourly rental market. Plus, Hertz also acquired Dollar Thrifty Automotive Group in 2012.

Under the terms of the deal, Zipcar will function as an Avis subsidiary with most of its senior management team remaining intact. The company had said in November that it expected to post its first annual profit, of $4 million, at the end it its fiscal year.

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