Avis Buys Zipcar To Surpass Hertz, Enterprise In Car Rental Market

In a move that will surely change the travel industry, Avis will buy Zipcar for about $500 million as the company expands to surpass Hertz and Enterprise in the car rental market.

The buyout offers Zipcar investors about $12.25 per share, which is a discount of about 32 percent to the IPO price. The company’s largest shareholder, Steve Case, will net about $96 million. Case held a 19.6 percent ownership in the rental car company.

“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 Avis CEO Ronald Nelson.

Zipcar, founded more than 10 years ago, controls about 75 percent of the $400 million car-sharing industry in the United States. Car sharing allows customers to rent cars at an hourly or daily rate and park in convenient reserved spots.

The total car-sharing market is projected to reach $10 billion over the next several years, Nelson said on a conference call with analysts.

Higher demand for car sharing amid rising gasoline prices has also attracted traditional car rental companies such as Hertz and Enterprise.

“Given the premium being paid by CAR and the robust process conducted by ZIP as stated on the conference call, we are placing a low probability on the emergence of a third party bidder,” said Paul Coster, an analyst at JP Morgan Securities.

Avis has been relegated to No.3 in the $22 billion U.S. car rental industry after Hertz secured the No.2 spot with its acquisition of Dollar Thrifty Automotive Group in August.

Avis also bid for Dollar Thrifty in 2010, but later dropped out of the race.

One analyst called the deal “the perfect merger” for Avis and Zipcar.

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