Well, that's one way for Avis to get some serious skin in the booming auto-sharing market.
Avis is announcing this morning that it will pay Zipcar shareholders $12.25 a share to take the leading car-sharing company off their hands, a nearly 50% premium to where Zipcar closed on Monday. The $491 million deal is a surprise, but it was probably necessary for both companies.
Outside of offering auto-sharing to companies at the enterprise level, Avis is a non-factor in consumer-facing rentals by the hour with gas and insurance included. Hertz is far behind Zipcar with its Hertz On Demand offering, but at least it's a legitimate player. Enterprise has its own Enterprise CarShare that it's been expanding by scooping up Mint Cars and PhillyCarShare in recent months.
Why would Zipcar listen to buyout overtures? Well, Hertz On Demand has been making waves by scrapping annual membership dues and offering one-way rentals. Zipcar has been able to grow despite those disruptive actions. Revenue climbed 15% in its latest quarter, and there are now 767,000 Zipsters out there, an 18% pop in members over the past year. However, the challenges of keeping up with cutthroat practices -- and the emergence of peer-to-peer car-sharing services led by RelayRides and Getaround -- were going to weigh on the company if it stayed on its own.
Yes, $12.25 a share is a sharp discount from its IPO at $18 two years ago. Longtime Zipcar investors won't be pleased. Even if this somehow turns into a bidding war -- and Hertz and Avis have been known to fight each other for deals in this sector where consolidation is the norm -- no one will pay $18 a share for Zipcar.
If Avis is smart, it won't simply fold Zipcar's membership and fleet into a new Avis On Demand or Avis CarShare banner. Let's hope that it realizes that a major reason that folks would rather pay to be a Zipcar member than to get Hertz On Demand without annual dues is that it's actually cool to be part of the Zipcar family. Avis needs to keep Zipcar's identity intact, making sure that it doesn't go beyond possibly calling this Zipcar by Avis.
Avis is buying Zipcar to make up for lost time. It better make sure that it doesn't squander the future.
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The article Zipcar Gets Pulled Over by Avis originally appeared on Fool.com.Longtime Fool contributor Rick Aristotle Munarriz owns shares of Zipcar. The Motley Fool owns shares of Hertz Global Holdings and Zipcar. Motley Fool newsletter services recommend Zipcar. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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