Avis Budget buys Zipcar for $500m Avis Budget Group, the US car rental chain, said on Wednesday it had agreed to buy Zipcar, the listed car sharing network, for about $500m. Zipcar went public last year with a listing of $18 a share. On its first day of trading shares soared 25 per cent. But since then, its stock has fallen 70 per cent before the Avis Budget deal was announced. The Avis Budget offer of $12.25 a share in cash represents a 49 per cent premium over the closing price on the last day of trading. The boards of both companies have approved the deal, and Zipcar shareholders owning a third of the outstanding stock have already agreed to vote in support of the transaction. For Avis Budget, the deal offers a path to growth in a heavily consolidated US car rental market. It had previously considered trying to acquire Dollar Thrifty, but Dollar Thrifty was taken over by Hertz last year. However Zipcar is just barely profitable. In the most recent quarter, net income reached $4.3m, and $1.7m of that amounted from the sale of Zero Emission Vehicle credits. Revenue for the quarter was $78m, a 15 per cent increase from the same time a year earlier. The companies said car sharing is now a $400m a year business in the US. Zipcar is the market leader, with operations in 20 cities in the US, Canada and Europe. Members can rent cars by the hour or for days at a time, allowing city dwellers to avoid the high fixed costs of car ownership. "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 Ronald Nelson, Avis Budget chairman and chief executive. Zipcar and other car sharing services have been far more successful than traditional car rental companies such as Avis Budget at reacting to the trend towards declining car ownership in many industrialised countries. Zipcar has followed the falls in many countries in the numbers of young people taking driving tests and moves back into inner city areas, by providing conveniently located, local car pick-up points for those who no longer own their own vehicles. In the US, it has also made cars available to drivers younger than the 25 that is the norm for traditional car rental companies. Avis Budget said it expects $50m to $70m in annual synergies from the deal, largely by using its existing operations to buy, operate, service and sell the cars that Zipcar needs to operate. "By combining Zipcar's expertise in on-demand mobility with Avis Budget Group's expertise in global fleet operations and vast global network, we will be able to accelerate the revolution we began in personal mobility," said Scott Griffith, chairman and chief executive of Zipcar. Zipcar will operate as a subsidiary of Avis Budget, and Mr Griffith will stay with the company. Avis Budget was advised by Citi, and received legal advise from Kirkland & Ellis. Zipcar was advised by Morgan Stanley, and received legal advice from Latham & Watkins.