* Deal for about $500 million, or $12.25/share in cash
* Offer is 49 percent premium to Monday close
* Deal to add to Avis's earnings from the second year
* Zipcar shares rise as much as 50 percent
* Avis shares rise 6 percent
By Sagarika Jaisinghani and Tej Sapru
Jan 2 Car rental company Avis Budget Group Inc
will buy Zipcar Inc for about $500 million to
take the top spot in the fast-growing U.S. car-sharing market,
racing past larger rivals Hertz Global Holdings Inc and
Enterprise Holdings Inc.
The cash offer of $12.25 per share -- a premium of 49
percent to Zipcar's Monday close -- will see its largest
shareholder, Steve Case, netting about $96 million.
Case's investment firm Revolution held a 19.6 percent stake
in Zipcar as of Aug. 28, according to Thomson Reuters data.
Revolution owned 17 percent of the company after Zipcar's
$18-per-share initial public offering in April 2011. The offer
is at a discount of 32 percent to the IPO price.
Zipcar shares were up 48 percent at $12.20 in late afternoon
trading on the Nasdaq on Wednesday.
"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," said Avis
CEO Ronald Nelson.
Zipcar, founded more than 10 years ago, controls about 75
percent of the $400 million car-sharing industry in the United
States. Car sharing allows customers to rent cars at an hourly
or daily rate and park in convenient reserved spots.
The total car-sharing market is projected to reach $10
billion over the next several years, Nelson said on a conference
call with analysts.
Higher demand for car sharing amid rising gasoline prices
has also attracted traditional car rental companies such as
Hertz and Enterprise.
Zipcar's business is at least five times larger than Hertz's
and Enterprise's car-sharing businesses, Needham & Co analyst
Kerry Rice said.
Analysts said a counter bid for Zipcar from either Hertz or
Enterprise was unlikely.
"Given the premium being paid by CAR and the robust process
conducted by ZIP as stated on the conference call, we are
placing a low probability on the emergence of a third party
bidder," said Paul Coster, an analyst at JP Morgan Securities.
Avis has been relegated to No.3 in the $22 billion U.S. car
rental industry after Hertz secured the No.2 spot with its
acquisition of Dollar Thrifty Automotive Group in August.
Avis also bid for Dollar Thrifty in 2010, but later dropped
out of the race.
The deal, expected to close in the spring of 2013, will add
to Avis's earnings, excluding items, from the second year and is
expected to generate between $50 million and $70 million in
Zipcar will operate as a unit of Avis and Scott Griffith
will remain the unit's chief.
The company said it expects to fund the transaction mainly
with available cash and additional debt. The company had cash
and marketable securities of about $554 million as of Sept. 30.
Zipcar has more than 760,000 members, or Zipsters, with a
presence in 20 cities in the United States, Canada and Europe.
Citigroup is advising Avis while Morgan Stanley is advising
Zipcar on the transaction.
Avis's shares were up 4.4 percent at $20.69 on the Nasdaq.
Hertz shares were up 3 percent on the New York Stock Exchange.