Why Zipcar Shares Zoomed
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Zipcar zoomed 48% today after car rental company Avis Budget Group agreed to buy the car sharing network for about $500 million.
So what: The all-cash deal values Zipcar at $12.25 per share and represents a whopping 49% premium to its closing price on Monday. Avis is making the move to get in on the high-growth car-sharing market and compete with Hertz Global Holdings which already has a service in the space, and judging by its own stock's 5% pop today, Mr. Market is pleased with the price being paid to do it.
Now what: Avis expects to generate $50 to $70 million in annual synergies as a result of the deal. "We see car sharing as highly complementary to traditional car rental, with rapid growth potential and representing a scalable opportunity for us as a combined company," said Avis Chairman and CEO Ronald Nelson. "We expect to apply Avis Budget's experience and efficiencies of fleet management with Zipcar's proven, customer-friendly technology to accelerate the growth of the Zipcar brand and to provide more options for Zipsters in more places." So while Zipcar shares might be all popped out, Avis and its newly bolstered growth potential might be worth looking into.
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The article Why Zipcar Shares Zoomed originally appeared on Fool.com.Fool contributor Brian Pacampara has no positions in the stocks mentioned above. The Motley Fool owns shares of Hertz Global Holdings and Zipcar. Motley Fool newsletter services recommend Zipcar. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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