Avis Budget Group Inc.'s proposed purchase of Zipcar Inc., a car-sharing company, will enable the combined company to meet swings in customer demand with fewer vehicles, the top executive at Avis Budget said.
The result could be annual savings of $50 million to $70 million, fewer new-vehicle sales from automakers and the ability to remarket those fewer vehicles more profitably after they are retired from the rental fleet.
Ronald Nelson, Avis Budget's chairman, told analysts in a conference call that a combined company would allow Zipcar to take advantage of Avis Budget's economies of scale in purchasing, maintaining and remarketing vehicles. The combined company also plans to reduce the number of vehicles at Zipcar locations during the week, when demand is low, and move unused Avis Budget vehicles to Zipcar locations on the weekend, when the car-sharing company's fleet strains to keep up with demand, he said.
"We can reduce the number of cars in Zipcar locations during the week without losing any significant revenue since these cars are unutilized now," Nelson told analysts during the Jan. 2 conference call.
"And second, by utilizing Avis Budget's excess weekend fleet inventory, we'll be able to satisfy more of Zipcar's existing but unmet weekend demand, which represents its most profitable revenue."
Avis Budget Group operates Avis Car Rental and Budget Rent A Car System Inc., with a total fleet of 360,000 vehicles in the United States. Zipcar has a fleet of more than 10,000 vehicles in urban area locations and college campuses in the United States, Canada, United Kingdom, Spain and Austria.
Avis Budget Group and Zipcar have diverse vehicle brands in their fleets, though Zipcar's fleet is dominated by small, fuel-efficient vehicles such as the Ford Focus, Honda Civic and Toyota Prius, according to its Web site.
Avis' and Budget's Web sites tout vehicles such as the Hyundai Accent and Ford Focus, as well as the Ford Taurus, Dodge Caravan and Chevrolet Traverse.
Avis Budget Group agreed to acquire Zipcar for $12.25 per share in cash representing a transaction value of approximately $500 million. The transaction is subject to approval by Zipcar shareholders and customary closing conditions. Zipcar's board unanimously approved the sale. The deal is expected to be completed this spring.
Following the merger, if approved, Zipcar would operate as a subsidiary of Avis Budget Group. Zipcar CEO Scott Griffith and COO Mark Norman are expected to stay on and remain in charge of Zipcar's day-to-day operations.