Zipcar, Avis Budget both surge following agreement to merge

theflyonthewall.com

Shares of car sharing service operator Zipcar (ZIP) are soaring after it agreed to be acquired by car rental company Avis Budget (CAR) for $12.25 per share in cash, or approximately $500M. Avis Budget's shares also rose after it announced the deal, which it said would be accretive to EPS in the second year. On the companies' conference call related to the deal, Avis Budget said it now sees car sharing as complementary to its traditional business and Zipcar said it expects the deal will "dramatically" reduce its costs associated with buying cars. Avis said it expects the deal will help it reach its growth and profitability targets more quickly and confirmed its guidance for FY12 EPS of $2.35-$2.45 and FY12 revenue of $7.3B. In mid-morning trading, Zipcar surged 48.67% to $12.25, Avis Budget advanced 5.10% to $20.83, and shares of Hertz (HTZ), Avis' primary rival, rose 3.07% to $16.77. Meanwhile, shares of I.D. Systems (IDSY), which struck a partnership agreement with Avis Budget during early 2012 to deploy a new generation of wireless vehicle rental technology, slid 38c, or 6.44% to $5.45, though Avis did state during its conference call that its merger with Zipcar is not expected to impact its existing agreement with I.D. Systems.

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