Global vehicle rental giant,
Avis Budget Group Inc.
) successfully completed the acquisition of the world's leading
car sharing network company, Zipcar Inc.
AVIS BUDGET GRP (CAR): Free Stock Analysis
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Last week, the transaction received clearance from the United
Kingdom Office of Fair Trading's. Earlier, the deal had received
approval from other regulatory bodies in the United States and
United Kingdom. On Feb 11 this year, Avis Budget successfully
completed the waiting period under the U.S. Hart-Scott-Rodino
Antitrust Improvements Act of 1976.
Avis agreed to buy Zipcar in Jan 2013 for a total value of $500
million. This strategic move will facilitate the company in
expanding its offerings from car rental to car sharing and
compete with rivals such as
United Rentals Inc.
Hertz Global Holdings Inc.
To finance this deal, Avis completed a debt financing worth
approximately $525 million on Mar 8. The new debt, which consists
of 2 components - senior notes and term loans -- carries a
weighted-average interest rate of 5.1%.
In the first part, Avis' subsidiary, Avis Budget Finance plc
closed the offering of its first ever Euro denominated senior
notes worth EURO 250 million (nearly $325 million), carrying an
annual interest rate of 6% and maturing at par in 2021.
In the second part, the company got a term-loan borrowing of $200
million, carrying an annual interest rate of 3.75% and due in
Avis Budget believes that the acquisition will generate an annual
synergy in the range of $50-$70 million. Further, we believe that
the transaction will lead to increasing revenues and reduce costs
by augmenting fleet utilization.
In the United States alone, car sharing is currently a lucrative
business worth nearly $400 million and is growing rapidly in
other parts of the world. With over 760,000 members, Zipcar has
presence in 20 major cities of the U.S., Canada and Europe.
We believe that by capitalizing on Zipcar's strong network along
with its leading-edge technology, Avis will definitely be able to
boost its top and bottom lines.
Zipcar is engaged in operating a car sharing network, providing
self-service vehicles to members located in reserved parking
spaces throughout the neighborhoods where they live and work. The
company's vehicles are available for use through its reservation
system accessible by phone, internet or wireless mobile devices.
Avis currently carries a Zacks Rank #4 (Sell). Another stock
performing well in the business services space is
), which has a Zacks Rank #1 (Strong Buy).