Zipped up

Avis Budget Group Inc. (Nasdaq: CAR) today announced it will acquire Zipcar Inc. (Nasdaq: ZIP) for $12.25 per share in cash, a 49 percent premium over the closing price on December 31, and representing a total transaction value of approximately $500 million.

The transaction is subject to approval by Zipcar shareholders and other customary closing conditions, and is expected to be completed in spring 2013. The boards of directors of both companies unanimously approved the transaction, and Zipcar shareholders representing approximately 32% of the outstanding common stock have agreed to vote their shares in support of the transaction.

Zipcar's languishing stock price shot up 48% on Wednesday's news, reaching $12.18 by close.

Avis Budget claims car sharing has grown to be a nearly $400 million business in the United States and is expanding rapidly in major cities around the world. Zipcar has led the industry with more than 760,000 members and a presence in 20 major metro areas in the United States, Canada and Europe, as well as fleets at over 300 college and university campuses. 

"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 L. Nelson, Avis Budget Group chairman and CEO. 

Avis Budget said it expects to generate $50 to $70 million in annual cost reductions as a result of the transaction, from procurement to operations and maintenance to disposition, as well as financing. Avis Budget also hopes to achieve cost savings by increasing fleet utilization across the two companies. 

"We will be well positioned to accelerate enhancements to the Zipcar member experience with more offers and additional services as well as an expanded network of locations," said Scott Griffith, chairman and CEO of Zipcar.

Following the acquisition, Zipcar will operate as a subsidiary of Avis Budget Group and will continue with its planned move to new headquarters in Boston. Avis Budget anticipates that key members of the Zipcar management team, including Griffith and Mark Norman, president and COO, will continue to set the overall direction and run day-to-day operations of Zipcar.