US vehicle rental services provider Avis Budget Group Inc (NASDAQ:CAR) has reached an accord to buy domestic car sharing network Zipcar Inc (NASDAQ:ZIP) in a deal valued at some USD500m (EUR377.4m).
Avis Budget will pay a cash consideration of USD12.25 per share for Zipcar’s stock, which is 49% more than the closing price of Zipcar’s shares on 31 December 2012, using mainly debt, as well as existing cash resources.
The deal, which has been backed by both firms’ boards but has yet to be greenlighted by the target’s stockholders, is seen to be wrapped up in the spring. Upon closing, Zipcar will become a subsidiary of the buyer.
As a result of the addition of Zipcar, Avis Budget will considerably increase its growth potential in the United States and abroad, with car sharing being highly complementary to traditional car rental, Avis Budget’s CEO, Ronald Nelson, said, commenting on the move.
The buyer eyes synergies of USD50m to USD70m per year as a result of the acquisition as well as an increase in earnings per share in the second year after closing.
Citigroup Inc (NYSE:C) and Kirkland & Ellis LLP are providing financial and legal advice to Avis Budget on the transaction. Morgan Stanley (NYSE:MS) is serving as financial advisor to Zipcar and Latham & Watkins LLP is advising the target on the legal matters.