Car rental giant Avis has just leaped into the growing car-sharing market, snapping up the ride-sharing leader Zipcar for a fee approaching a cool $500 million, it said in a press release earlier today.
The deal, which is set to be finalized in the next few months, gives Avis a route into the fast-growing car-sharing industry, while Zipcar gets itself an extremely powerful backer that can help the company to be even more efficient. Even so, it looks as if Avis is taking a huge gamble, using up the vast majority of the $554 million it possesses in cash and securities to tie up the deal.
Under the terms of the deal, Zipcar will retain its own brand and operate as a subsidiary of Avis. In line with this, Avis said that it will bring its expertise on matters regarding fleet procurement, operations and maintenance to achieve cost savings of around $50 to $70 million a year for the company.
An example of this is that Avis has the capacity to lend Zipcar extra vehicles on weekends or other days when there is high demand. In addition, it’s believed that Zipcar would be able to offer better deals and promotions with its new backing, and can even look to set itself up in new locations.
Scott Griffith, CEO and Chairman of Zipcar, expanded on these ideas:
“By combining Zipcar’s expertise in on-demand mobility with Avis Budget Group’s expertise in global fleet operations and vast global network, we will be able to accelerate the revolution we began in personal mobility.”
Ronald L. Nelson, CEO and chairman of Avis Budget Group, added that he saw car-sharing as a huge growth opportunity for Avis, one that compliments the car rental business perfectly. He stressed that the idea was to continue the Zipcar brand and strengthen this, utilizing its technology to offer even more options for the Avis and Budget brands, and vice versa.