Global vehicle rental giant
Avis Budget Group, Inc.
) has recently agreed to buy the world's leading car sharing
). This strategic move will facilitate the company in expanding
its offerings from car rental to car sharing and compete with
Hertz Global Holdings, Inc.
), which has its own car sharing service - Hertz on Demand.
The deal - expected to close by spring 2013 - has a total
worth of $500 million. To finance this, Avis Budget will go for
corporate borrowings and use its available cash. At the end of
September 30, 2012, Avis Group had cash and marketable securities
of nearly $554 million.
Avis Budget believes that the transaction will generate an
annual synergy in the range of $50-$70 million. Further, we
believe that the acquisition will lead to increasing revenue and
reduce costs by augmenting fleet utilization.
In the United States alone, car sharing is expected to be
nearly worth $400 million business and it is growing rapidly in
other parts of the world. With over 760,000 members, Zipcar has
presence in 20 major cities of U.S., Canada and Europe. We
believe that by capitalizing Zipcar's strong network along with
its leading-edge technology, Avis Budget will definitely able to
boost its top and bottom lines.
Zipcar is engaged in operating 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
Concurrently, Avis Budget also reaffirmed its sales and
earnings per share outlook for fiscal 2012. The company continues
to expect revenue of approximately $7.3 billion and earnings in
the range of $2.35-$2.45 per share. Adjusted EBITDA is expected
to be between $825 million and $840 million, while pre-tax income
is anticipated in the band of $450-$465 million.
Currently, Avis Budget holds a Zacks #3 Rank implying a
short-term Hold rating.
AVIS BUDGET GRP (CAR): Free Stock Analysis
HERTZ GLBL HLDG (HTZ): Free Stock Analysis
ZIPCAR INC (ZIP): Free Stock Analysis Report
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