Zipcar (ZIP, NASDAQ, 52 week range 5.90 – 16.25) has agreed to be sold to Avis Budget Group Inc. for $491 million, or $12.25 per share. Steve Case’s Revolution Living LLC fund was an early investor in the car-sharing service, currently holding close to 20 percent ownership, and Case personally owns approximately 1 million shares.
Zipcar was started in 2000 and has about 760,000 members but has not yet turned a year-end profit. The company went public in April 2011 at $18 per share and saw its share price surge to $31.50 on the first day of trading. It has been downhill ever since, dropping below $6 per share just last November. The Avis offering represents an almost 50 percent premium to its share price before the deal was announced.
Avis was previously the loser in its attempt to buy Dollar Thrifty, which Hertz closed on late last year for $2.6 billion. Some are concerned about the high valuation for Zipcar, but Avis contends that it will see a yearly savings of $50 to $70 million through synergies including procurement and management. The effects on actually earnings remain to be seen.
The car-sharing sector of the rental market is expected to grow at a good clip, starting from Zipcar’s initial locations on college campuses to its activity in 20 cities in the U.S., Canada and Europe. The overall market could reach $10 billion in North America, Asia and Europe. Enterprise and Hertz are already rolling out similar offerings to their customers. This is definitely a model that would work well here in Hawaii, especially in the Waikiki market.