Avis Budget Car To Buy Zipcar For $500 Million

Zipcar has faced increased competition, costs in car sharing market.

Avis Budget Group's New Year's resolution: learn how to share. The car giant is said to be starting its new year by shelling out $500 million cash to buy Zipcar, the popular car sharing company.

Car sharing has become increasingly popular, especially for people living in cities, who only need a personal vehicle a few times a year to supplement public transportation systems. But for smaller companies like Zipcar, the industry is said to be getting to be a tougher place to be with the rising costs of fuel and increased competition from more traditional car rental companies like Hertz.

Update: TechCrunch points out that today's rumors have coincided with what may be an unsettling piece of news for Avis. Powers Taylor, a securities law firm, is investigating the deal and may file a lawsuit to block it on the grounds it's unfair to shareholders of ZipCar. The issue seems to be that a buying price of $500 million leads to a price of $12.25 for each share, which is far below Zipcar's peak during the last year of $16.25.

Undervaluing stock like this is a tricky business, because typically the acquiring company has to offer an overpriced deal in order to seal shareholder approval. While Zipcar's price today has risen on this news from recent lows, it's still below its 52 week maximum—the figure that Powers Taylor is interested in.

[Image: Flickr user jm3]

Add New Comment

0 Comments