Why Zipcar Shares Zoomed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Zipcar (UNKNOWN: ZIP.DL2  ) zoomed 48% today after car rental company Avis Budget Group (NASDAQ: CAR  ) agreed to buy the car sharing network for about $500 million.

So what: The all-cash deal values Zipcar at $12.25 per share and represents a whopping 49% premium to its closing price on Monday. Avis is making the move to get in on the high-growth car-sharing market and compete with Hertz Global Holdings (NYSE: HTZ  ) which already has a service in the space, and judging by its own stock's 5% pop today, Mr. Market is pleased with the price being paid to do it.

Now what: Avis expects to generate $50 to $70 million in annual synergies as a result of the deal. "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 Avis Chairman and CEO Ronald Nelson. "We expect to apply Avis Budget's experience and efficiencies of fleet management with Zipcar's proven, customer-friendly technology to accelerate the growth of the Zipcar brand and to provide more options for Zipsters in more places." So while Zipcar shares might be all popped out, Avis and its newly bolstered growth potential might be worth looking into.

Interested in more info on Zipcar? Add it to your watchlist.

Interested in more info on Avis? Add it to your watchlist.


Read/Post Comments (2) | Recommend This Article (3)

Comments from our Foolish Readers

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  • Report this Comment On January 02, 2013, at 3:31 PM, leaderoftheback wrote:

    All I can say is...OUCH!

    A 50% premium?

    So much for "Buy and Hold!"

    I think this locks in a lot of losses...and I predict that this is not the end of it...either a bidding war will break out, or a million lawsuits.

  • Report this Comment On January 02, 2013, at 3:40 PM, mrbkush wrote:

    Hey why not publish a list of all the bs pump stories your guys wrote. Hahahaha

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