zipcar
637 days ago
 

Avis buys car sharing network Zipcar for $500 million

A significant and sizeable deal in travel to start 2013: Avis Budget Group has splashed out $500 million on vehicle sharing network Zipcar.

The deal illustrates the rapid growth and maturity of the car-sharing phenomenon as established car rental firms eye a growing and popular marketplace and see it as a natural bolt-on to existing services.

Acquiring the company is subject to Zipcar shareholder approval and expected to close in the next few months.

The service currently has around 750,000 members (called Zipsters) and operates in 20 major cities in the US, Canada and Europe. It is also especially strong in student communities, with fleets in over 300 campuses.

There will be some level of integration between the two brands, Avis Budget says in a statement – introducing its “fleet management experience” to car-sharing and extend Zipcar’s “mobility solutions” to the Avis and Budget rental services.

Zipcar joined the public markets with its own IPO in April 2011, however its share price has fallen by 60% over the course of the last year.

Avis Budget has paid $12.25 per share in cash, a 49% premium over the closing price for Zipcar at the end of trading in 2012. The new owner expects to generate between $50 million and $70 million in cost savings as a result of the deal.

This will come mainly in the form of fleet life cycle efficiency across the group as well as eliminating costs associated with Zipcar’s status as a public company.

The company will proceed with its planned transfer to a new headquarters to Boston, Massachusetts, and Scott Griffith (chairman and CEO) and Mark Norman (president and COO) will continue to run operations.

Avis Budget Group CEO and chairman, Ronald Nelson, says:

“By combining with Zipcar, we will significantly increase our growth potential, both in the US 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.”

The move is not entirely unexpected, with rumours circulating in recent weeks that a deal to see a car rental giant such as Avis Budget throw itself in to the car-sharing marketplace.

Rival Hertz has its own Connect By Hertz brand, but such an acquisition hands Avis Budget a ready-made and popular brand and the opportunity to integrate services even further.

Ground transportation in general has been tipped as the next battleground in travel distribution as established players look to seize on the growing acceptance and enthusiasm for the sharing phenomenon with consumers.

 
 
Kevin May

About the Writer :: Kevin May

Kevin May is editor and a co-founder of Tnooz. He was previously editor of UK-based magazine Travolution for nearly four years and web editor of Media Week UK from 2003 to 2005.

He has also worked in regional newspapers (Essex Enquirer) and started his career in journalism at the Police Gazette at New Scotland Yard in London. He has a degree in criminology and a postgraduate diploma in magazine journalism.

 

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  1. James Craven

    Oh and by the way Steve Case of AOL fame pockets $96 mil through his Revotlution investment fund and states, “this merger signals that the sharing economy has come of age.” And “What’s driving the boom isn’t just that it’s easier to share, but that it’s often a hassle to own.” Hmmmmmm

     
  2. Timothy O'Neil-Dunne

    I think this purchase sends a clear message to those who believe that its OK to comply or not with current legislation.

    One of the reasons ZipCar and Hertz on Demand both work in the “Sharing” economy is that there is a clear sense of liability and a clear value. Both of which are handled by the companies concerned. AirBnB and the accommodation players in “Sharing” are now only just waking up to the liability and legality issues. There has been frantic efforts to adjust the rules to isolate the problems they face. (If you are an AirBnB “host” you might want to read the new T&Cs VERY carefully. Ditto the new ones from Wimdu. About now those investors who have pumped loads of cash into it are probably hi5ing themselves. BUT they should be eying the door. However in my opinion this is all window dressing.

    ZipCar addressed its car sharing liability early through membership and its legal status. It also lobbied hard to ensure that it could get the laws changed to allow the service. Hertz on-demand service is also a straight rental contract provided by a licensed provider. Both of them legal and both legitimate to the consumer and local and national legislation.

    Congrats to the ZipCar team. Avis’s expertise will allow the business to grow and flourish.

    Cheers

     
  3. Sherif Hassan

    This is a very wise move. Beside Hertz Avis has to overcome competition from Enterprise Car Rentals. Enterprise has quite a strong customer base at least in US and to their advantage they have that Business lease Program that they can lease you a car for few months. Few of our clients went for that program after they rented Enterprise Cars through us .

     
  4. Raj Chudasama

    Zipcar is a great concept and a great game changer to the traditional way to rent cars. Great for guests at hotels that only need to the car for a few hours.

     
  5. Sean O'Neill

    Sean O'Neill

    This is an interesting countermove to Hertz, which has been expanding its Hertz on Demand hourly rental service to compete with Zipcar.

    Hertz executive said a few days ago:
    We’re growing infrastructure off-airport. We’ll grow that to 4,000 in a year or two, up from 2,500. Only 50% of registered drivers have rented a car, and the others don’t realize how economical it is. With more locations, and with making people aware of what a value rental is, we can grow the market for Hertz on Demand rent by the hour. Not just in cities but in suburbia, as well. Car sharing is not a niche play.

    http://www.travelweekly.com/Travel-News/Travel-Agent-Issues/Preview-2013-Executive-View/

    Unlike Zipcar, Hertz on Demand doesn’t require an annual fee, and it offers one-way rentals. Avis might change the Zipcar product to remain competitive.

     
 
 

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