Cambridge-based Zipcar is being acquired by Avis for nearly $500 million, following a period in which the pioneering local hourly car rental company faced increased competition from traditional car rental companies entering the hourly rental market.
Zipcar Inc. will become a unit of Avis Budget Group, Inc. based in Parsippany, N.J., and Zipcar chief executive Scott Griffith and president Mark Norman are expected to remain with the company. Zipcar will go ahead with its planned move from Cambridge to the Innovation District.
Avis will pay $12.25 per share for the company, a 49 percent premium to the company’s closing price on Friday. Zipcar shares jumped nearly $4, or 48 percent, to $12.23 in mid-day trading trading Wednesday. If approved by shareholders, the deal is expected to close in the spring.
Despite being the leader in the hourly car rental market since the company was founded in 2000, Zipcar has struggled. The company, which has 760,000 members and annual revenues of more than $240 million, said in May that it expected to make its first annual profit last year.
But with Hertz Corp. making a big push into the hourly market in 2011, and Enterprise Holdings Inc. buying the on-demand rental company Mint Cars On-Demand last spring, Zipcar’s hold on the market grew shakier, and the company’s stock plummeted 39 percent last year.
The hourly car rental market, often referred to as car sharing, was a $350 million industry with 800,000 members in North America, according to 2010 data—the most recent available—from the California-based research and consulting firm Frost & Sullivan, and it is projected to grow 20 to 30 percent a year through 2018.
Zipcar chief executive Griffith said the acquisition by Avis is a “big win” for Zipcar members. Joining forces with Avis will give Zipcar the ability to add more cars to its fleet, especially on weekends when Zipcars can be sold out at peak times, he said. It will also give Zipcar members easier access to long-term rentals through Avis and allow Zipcar to invest more aggressively in mobile technology that gives customers access to cars through their smartphones.
Griffith said he didn’t anticipate major changes for the company, or for Zipcar’s 400 employees around the world.
“This is a revolution that Zipcar started many years ago and I think this really cements our position as the pole position in the global mobility market,” he said.
Rental car companies have started snapping up smaller hourly rental businesses, but that does not spell the end of independent car sharing, said Mohamed Mubarak Moosa, a mobility consultant with Frost & Sullivan. There were about 35 car sharing companies in the United States and Canada in 2011, he said , and more startups are expected to launch as the market continues to grow.