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Avis to Acquire Zipcar (CAR, ZIP)

Shares of car-sharing service provider Zipcar Inc. (NASDAQ: ZIP) skyrocketed nearly 48 percent in pre-market trading on Wednesday after Avis Budget Group Inc. (NASDAQ: CAR) announced that it has agreed to acquire Zipcar in an all cash deal, estimated at $500 million or $12.25 a share, which represents a premium of 49 percent over ZIP’s closing price of $8.24 on last trading day of 2012.

The Cambridge, Massachusetts-based company, which rents vehicles by the day or hour basis, went public on April 2011, priced at $18 a share.

Avis Budget also edged up nearly 2.30 percent. The Company operates two brands in the global vehicle rental industry through Avis and Budget. While Avis is a rental car division focused to cater cars to commercial and leisure segments of the travel industry, Budget is a rental car supplier focused mainly on more value-conscious segments of the industry.

Commenting over the acquisition, Ronald Nelson, Avis’s Chief Executive said in a statement, “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.”

Founded in 2000, Zipcar boasts to have more than 760,000 members. The Company provide services in 20 metropolitan areas spread across the U.S. , Canada and Europe along with many areas near college campuses. During the third quarter ended September 30, Zipcar had reported a 15 percent climb in net revenue from the year earlier quarter, citing 18 percent jump in membership.

Although Zipacar had a very wobbly time ever since the Company was founded, struggling to post consecutive quarterly profits; its performance improved considerably after going public. Zipcar grew at a double digit rate, consistently for each quarter since then as it expanded its traction in the U.S and international markets.

For Avis Budget Group, the acquisition will result in significant cost reductions along with savings on fleet, said the Company. Avis estimates to save $50 million to $70 million, annually through this deal.


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