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Avis Budget group to acquire car-sharing company Zipcar in cash deal for approximately $500 million
2 January 2013
|Avis Budget sees car-sharing as a rapidly growing component of the mobility industry, with Zipcar well positioned for the opportunity. Source: Avis Budget. Click to enlarge.|
Rental car company Avis Budget Group, Inc. has agreed to acquire car-sharing company Zipcar for $12.25 per share in cash, a 49% premium over the closing price on 31 December 2012, representing a total transaction value of approximately $500 million. Founded in 2000, Zipcar operates the largest member-based, car sharing network in the world.
The transaction is subject to approval by Zipcar shareholders and other customary closing conditions, and is expected to be completed in the spring of 2013. The Boards of Directors of both companies unanimously approved the transaction, and Zipcar shareholders representing approximately 32% of the outstanding common stock have agreed to vote their shares in support of the transaction.
|Positioning of car sharing and car rental. Source: Avis Budget. Click to enlarge.|
Car sharing has grown to be a nearly $400-million business in the United States and is expanding rapidly in major cities around the world. Zipcar now has more than 760,000 members (“Zipsters”), with a market-leading presence in 20 major metropolitan areas in the United States, Canada and Europe, and fleet positioned at more than 300 college and university campuses.
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.
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. 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.—Ronald L. Nelson, Avis Budget Group chairman and CEO
Avis Budget expects to generate $50 to $70 million in annual synergies as a result of the transaction. In particular, Avis Budget expects significant cost reductions across the fleet life cycle (from procurement to operations and maintenance to disposition, as well as financing), in addition to savings from eliminating Zipcar’s public-company costs.
|The companies expect substantial synergies in fleet utilization. Source: Avis Budget. Click to enlarge.|
Avis Budget also plans to achieve substantial cost savings by increasing fleet utilization across the two companies. Significant revenue growth opportunities exist, including by leveraging Avis Budget’s fleet to meet more of Zipsters’ weekend demand, which is currently constrained by fleet availability.
Avis Budget expects these synergies, combined with the expected growth and rising profitability of Zipcar, to make the transaction accretive to Avis Budget’s earnings per share in the second year following the acquisition, excluding certain items and purchase-accounting effects.
Following the acquisition, Zipcar will operate as a subsidiary of Avis Budget Group and will continue with its planned move to new headquarters in Boston, Massachusetts. Avis Budget anticipates that key members of the Zipcar management team will continue to set the overall direction and run day-to-day operations of Zipcar.
Avis Budget Group expects to fund the purchase price primarily with incremental corporate debt borrowings, as well as available cash. As of 30 September 2012, Avis Budget Group had cash and marketable securities of approximately $554 million, and Zipcar had cash and marketable securities of approximately $82 million, or approximately $2 per Zipcar share.
Citigroup is acting as financial advisor, and Kirkland & Ellis LLP is acting as legal counsel, to Avis Budget Group. Morgan Stanley is acting as financial advisor, and Latham & Watkins LLP is acting as legal counsel, to Zipcar.
Separately, Avis Budget Group reiterated its previous estimates of its full-year 2012 results. Avis Budget continues to expect that its full-year 2012 revenue will be approximately $7.3 billion, a 24% increase compared to 2011, and that its 2012 Adjusted EBITDA will be approximately $825 million to $840 million, excluding certain items, an increase of 35% to 38% compared to the prior year.
Avis Budget also continues to expect that its 2012 pretax income will be $450 million to $465 million and that its diluted earnings per share will be approximately $2.35 to $2.45, excluding certain items.
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