Vehicle rental giant Avis Budget Group announced today that it will purchase popular car-sharing company Zipcar for approximately $500 million. Zipcar shareholders must approve the deal before it is finalized, Avis said.
“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, Avis Budget Group chairman and chief executive officer, in a statement. “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. We also expect to leverage Zipcar’s technology to expand mobility solutions under the Avis and Budget brands.”
For Zipcar users, known as “Zipsters,” the acquisition means better availability of Zipcars, Avis said, as the company, which encompasses both Avis and Budget car rental services, will make some of its traditional fleet available as Zipcar vehicles during weekends when demand for Zipcar service is particularly high.
Launched in 2000, Zipcar has since expanded to dozens of metropolitan areas in the U.S., Canada, and Europe, as well as 300 college and university campuses. Avis says Zipcar generates around $400 million a year in revenue from its more than 760,000 members.
To use Zipcar, customers sign up for an annual Zipcar membership. Once a member is approved – you have to have a good driving record and be over a certain age – Zipcar then provides a membership card, which uses an RFID (radio frequency identification) chip to unlock and lock the car. Zipcar members can then reserve a Zipcar online, or through an iOS or Android app, which can also be used to unlock and lock the car. To pick up the car, a user simply finds the vehicle at the designated Zipcar parking spots, unlocks the car with her so-called Zipcard, hops in, and drives off. The user then returns the Zipcar to the same parking spot by the end of the reservation period, which can be as little as one hour.
Avis’s acquisition of Zipcar is expected to go through by spring of this year.
Update: It looks as though the Avis/Zipcar deal might drive into some trouble. Securities litigation firm Powers Taylor, and former SEC attorney Willie Briscoe, announced that they may file a lawsuit to stop the deal, or at least change the terms. The problem, they say, is that $500 million is too low a number. “Under the terms of the proposed deal valued at approximately $500 million, Zipcar shareholders will only receive $12.25 in cash for each share of Zipcar stock owned, which is below the 52 week high of $16.25 per share,” the law firms said. Briscoe added that “due to the proposed sale price, the size of the deal and other factors, we believe this transaction may undervalue Zipcar’s stock. Our proposed lawsuit will seek to obtain the highest share price for all shareholders.”