NEW YORK — Avis is leaping into car-sharing service by reaching an agreement to buy Zipcar for $491.2 million, aiming to capture a new type of customer and technology that will vastly expand its car rental options.
Car sharing has become a popular alternative to traditional rentals in metropolitan areas and on college campuses. It allows members to obtain a vehicle for an hour or two for short trips instead of renting a car for a day or using mass transit. The segment has been growing while traditional car rentals have struggled in the slow-growth economy.
Zipcar, founded in 2000, has more than 760,000 members, triple what it had in 2008. It went public in 2011, and 2012 is expected to be its first-ever profitable year. Avis Budget Group Inc. is the third-largest U.S. rental car company, behind Enterprise Rent-a-Car and Hertz Global Holdings Inc.
Those two companies have their own smaller car-sharing services.
Avis will pay $12.25 a share, a 49 percent premium to Zipcar’s closing price on Friday.
Zipcar stock closed Wednesday on the Nasdaq exchange at $12.19. Avis shares jumped 4.6 percent to $20.74.
The boards of both companies unanimously approved the buyout. If Zipcar shareholders approve the deal, it’s expected to close in the spring.
“I’ve been somewhat dismissive of car sharing in the past but what I’ve come to realize is that car sharing, particularly on the scale that Zipcar has achieved and will achieve, is complementary to our traditional business,” Ron Nelson, Avis’ chairman and chief executive officer said in a conference call after the deal was announced.
He said the acquisition means Avis will now be able to reach younger, more tech-savvy consumers who prefer sharing services.
Zipcar parks cars throughout cities and college campuses, which allows renters to avoid waiting in lines at traditional car rental counters. Some areas provide reserved parking for the cars, which can be contracted for online or through the companies’ smart-phone applications. That technology was attractive to Avis, which hopes to expand Zipcar's technological capabilities to its own business.
Avis said it expects Zipcar’s chairman and CEO, Scott Griffith, to help run its day-to-day operations.
The car-sharing companies pay for fuel and insurance, costs not included in standard car rentals. Although the hourly rental options are quicker and cheaper than renting a car by the day, Zipcar and other car-sharing services are generally more expensive for rentals longer than 24 hours.