Global vehicle rental giant,
Avis Budget Group Inc.
) got the United Kingdom Office of Fair Trading's clearance for
acquiring the world's leading car sharing network company,
), on Mar 8, 2013. Both the companies expect the acquisition to
complete in this week.
The deal has also received a clean chit from other regulatory
bodies in United States and United Kingdom. On Feb 11 this year,
Avis Budget has successfully completed the waiting period under
the U.S. Hart-Scott-Rodino Antitrust Improvements Act of
Avis had 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 of
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
has 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 it 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
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 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
Avis currently carries a Zacks Rank #4 (Sell).
AVIS BUDGET GRP (CAR): Free Stock Analysis
HERTZ GLBL HLDG (HTZ): Free Stock Analysis
UTD RENTALS INC (URI): Free Stock Analysis
ZIPCAR INC (ZIP): Free Stock Analysis Report
To read this article on Zacks.com click here.