Avis Buys Zipcar for $500 Million

On Wednesday, Avis announced to buy Zipcar for nearly $500 million or $12.25 per share. The possible deal reflected Avis’ eagerness to take a bite out of the U.S.’s approximately $400 million car-sharing market.

The deal is a 49 percent premium over the closing price of Zipcar on December 31, which is expected to conclude formally in the spring of 2013. .

Avis announced the deal in a press release in which they mentioned about Zipcar’s presence in 20 important cities in the U.S. and having 760,000 members or ‘Zipsters’. The CEO and the Budget Group Chairman of Avis, Ronald L. Nelson, said in the press release that they hoped to boost their growth potential both internationally and within the U.S. by their merging with Zipcar. He also hoped to take their company in a better position by serving a great deal of various consumer and commercial transportation.

Zipcar was formed in 2000 with the idea of bringing car-sharing to the United States. Such a practice is popular in Europe. The business idea appealed to the car rental firms and they imitated it. For example, UHaul offers ‘UCarShare’, Enterprise has ‘WeCar’, and Hertz offers ‘Hertz on Demand’. The market became competitive due to the entrance of regional companies including San Francisco’s City CarShare and Chicago’s I-G.

However, Zipcar had consistently tried to outperform their rivals by adopting new innovative technologies. One such innovation is an Android and iPhone app that allows consumers to activate the horn of their Zipcar. It helps the users to unlock their cars remotely and finding it in busy parking lots without much hassle. The company also used to offer online and mobile-based reservations for clients.

On the face of a possible obstruction to the deal, Willie Briscoe, the former SEC attorney, and litigation firm Powers Taylor LLP announced to investigate on the Zipcar sale as Avis’s bid dropped below $16.25 per share, the stock’s 52-week high.

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