Car sharing has become a popular alternative to traditional rentals in metropolitan areas and on college campuses, allowing members to quickly procure a vehicle for quick trips. Zipcar, which was founded in 2000, has more than 760,000 members. It went public in 2011.
"By combining with Zipcar, we will significantly increase our growth potential, both in the United States and internationally, and will position our company to better serve a greater variety of consumer and commercial transportation needs," said Avis CEO Ronald Nelson in a statement.
Nelson said the acquisition means Avis will now be able to reach younger, more tech-savvy consumers that prefer sharing services.
"I've been somewhat dismissive of car sharing in the past but what I've come to realize is that car sharing, particularly on the scale that Zipcar has achieved and will achieve, is complementary to our traditional business," Nelson said in a conference call after the deal was announced.
Zipcar parks cars throughout cities and college campuses, which allows renters to avoid waiting in lines at traditional car rental counters. Some areas provide reserved parking for the cars, which can be located online or through the companies' smart phone applications. That technology was attractive to Avis, which hopes to expand Zipcar's vast technological capabilities to its own business.
The car-sharing companies pay for fuel, a cost not included in standard car rentals. Though the hourly rental options are quicker and cheaper than renting a car by the day, Zipcar and other car-sharing services are generally more expensive for rentals longer than 24 hours.
The acquisition will help Avis better compete with Enterprise and Hertz, which have their own smaller car-sharing services. And having access to Avis' fleet of cars will help Zipcar meet high demand on weekends when most people take a trip to the grocery store or run other errands.
Avis estimates it will save about $50 to $70 million a year through combining the two businesses into one.
Avis will pay $12.25 per share, which is a 49 percent premium to Zipcar's closing price on Friday. The stock lost more than half its value in early 2012 year as its results and outlook spooked Wall Street. But late last year, the stock began to recover as the company saw growth in members and revenue. And on Wednesday, the stock soared 48.4 percent to $12.23.
The boards of both companies unanimously approved the buyout. If Zipcar shareholders approve the deal, it's expected to close in the spring.
Avis, which is based in Parsippany, New Jersey, said it expects certain members of Zipcar management, including Chairman and CEO Scott Griffith and President and Chief Operating Officer Mark Norman, to help run its day-to-day operations.
Avis also maintained its 2012 adjusted earnings forecast Monday of about $2.35 to $2.45 per share on revenue of approximately $7.3 billion. Analysts predict earnings of $2.42 per share on revenue of $7.3 billion.
Avis shares jumped 4.7 percent to $20.76, after earlier hitting a new 52-week high of $21.09.