Avis Budget Group (Avis) is a vehicle rentals company that has acquired Zipcar for $12.25 per share. This extrapolates to $500 million. Avis is paying for the acquisition in cash. Avis had around $554 million in cash and equivalents as of the end of September 30, 2012. Avis’ market capitalization is at around $2.23 billion.
The price that Avis is paying per share of Zipcar is at almost a 50% premium of Zipcar’s closing price on December 31, 2012. Avis is expected to fund the purchase with incremental corporate debt borrowings. Avis believes that they will generate around $50-$70 million in “annual synergies” from this deal. Avis booked around $7.3 billion in revenue for 2012. Avis has around 29,000 employees.
Zipcar was founded in 2000. The company has around 767,000 users and 11,000 vehicles throughout the U.S., Canada, the U.K., Spain, and Austria. Zipcar merged with Flexcar in 2007 to grow even faster. Zipcar raised venture capital from firms like Benchmark Capital, Greylock Partners, Globespan Capital Partners, Meritech Capital Partners and Pinnacle Ventures before going public in April 2011. When Zipcar went public, the company hit a market cap of over $1 billion.
Avis Budget Group runs two of the leading vehicle rental companies: Avis and Budget. Between the two companies, they have 10,000 locations in 175 countries. In a press release, Avis chairman and CEO Ronald L. Nelson stated:
“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.”
Zipcar will operate as a subsidiary of Avis Budget Group going forward. The company will continue with a planned move to new headquarters in Boston, Massachusetts. Key members of Zipcar’s management team will continue to maintain the day-to-day operations at the company. This includes Zipcar CEO and chairman Scott Griffith.
UPDATE: Securities litigation company Powers Taylor and former ex-U.S. SEC attorney Willie Briscoe announced that they are investigating and may file a lawsuit to block the deal. The $12.25 cash price per share is below Zipcar’s 52-week high of $16.25 per share.
?Due to the proposed sale price, the size of the deal and other factors, we believe this transaction may undervalue Zipcar?s stock,? stated Briscoe. ?Our proposed lawsuit will seek to obtain the highest share price for all shareholders.?