Avis Buying Zipcar in $500M Deal, Shares Jump

by Christopher Freeburn | January 2, 2013 10:12 am

Auto Cars 300x199 Avis Buying Zipcar in $500M Deal, Shares Jump[1]The Avis Budget Group (NASDAQ:CAR[2]) will be moving into the hourly car-rental market[3].

The company announced on Wednesday that it will purchase Zipcar (NASDAQ:ZIP[4]) 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.

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[5]) and privately held Enterprise have entered the hourly rental market. Plus, Hertz also acquired Dollar Thrifty Automotive Group in 2012[6].

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.

Endnotes:
  1. [Image]: http://investorplace.com/wp-content/uploads/2011/05/Auto-Cars.jpg
  2. CAR: http://studio-5.financialcontent.com/investplace/quote?Symbol=CAR
  3. moving into the hourly car-rental market: http://dealbook.nytimes.com/2013/01/02/avis-to-buy-zipcar-for-500-million/
  4. ZIP: http://studio-5.financialcontent.com/investplace/quote?Symbol=ZIP
  5. HTZ: http://studio-5.financialcontent.com/investplace/quote?Symbol=HTZ
  6. acquired Dollar Thrifty Automotive Group in 2012: http://investorplace.com/2012/08/hertz-hits-the-gas-with-dollar-thrifty-buy/

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