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updated: 1/2/2013 6:56 AM

Avis buying Zipcar in deal worth nearly $500 million

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  • In this April 14, 2011 photo Zipcar Chairman and CEO Scott Griffith stands with a Zipcar Mini-Cooper before the opening bell at the NASDAQ Market Site in New York.

      In this April 14, 2011 photo Zipcar Chairman and CEO Scott Griffith stands with a Zipcar Mini-Cooper before the opening bell at the NASDAQ Market Site in New York.
    Associated Press

 
Associated Press

PARSIPPANY, N.J. -- 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 quickly procure a vehicle for quick trips. Zipcar, which was founded in 2000, has more than 760,000 members. It went public in 2011.

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"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 also help Zipcar meet high demand on weekends, Avis said, when most people make a run to the grocery store or run other errands.

Avis Budget Group Inc. will pay $12.25 per share, which is a 49 percent premium to Zipcar's Friday closing price. 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 Shares jumped more than 47 percent in premarket trading Monday.

The boards of both companies unanimously approved the buyout.

Avis anticipates $50 million to $70 million in annual savings. The Parsippany, N.J. 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.

If Zipcar shareholders approve the deal, it's expected to close in the spring.

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.

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