Will Hertz-Thrifty deal help Zipcar?

It has opened the door for other players to approach the car-sharing company as an interesting buyout target.

By Trefis Aug 30, 2012 10:50AM
Trefis LogoShares of Hertz Global Holdings (HTZ) and Dollar Thrifty Automotive Group (DTG) rose sharply Monday after Hertz struck an agreement to acquire Thrifty for about $2.6 billion. Speculation about a deal had surfaced late last week.

Hertz had been pursuing Dollar Thrifty over the past five years, and its current bid is more than double what it had offered more than two years ago. The deal makes Hertz the No. 2 car rental company in the U.S., with about 24% market share. So what does it mean for the car-sharing company Zipcar (ZIP)?


Zipcar serves 730,000 members with a fleet of more than 11,000 vehicles in North America and Europe. Aside from competing with traditional rental companies, it competes with car-sharing services like Hertz On Demand, Enterprise's WeCar, UHaul's UCarShare and City Car Share.


Zipcar Average Number of Members per Year for Zipcar North America

Where does this leave Zipcar?

The company had a rough second quarter, but let's focus on its recent developments. Zipcar bought the leading car-sharing service CarSharing.at in Austria to help expand its European network.


It also announced expansion of the Zipvan cargo van service to Seattle, Los Angeles, Philadelphia and Portland and has plans to roll out the service over the next 12 months to the major remaining markets in North America.


Zipcar is also looking into services such as P2P car sharing and ride sharing to further augment the car-sharing mobility concept. Without any major impact on the pricing of this segment, the Hertz-Thrifty combo will help firm up the pricing, or at least limit the discounting of auto rentals in general.


Zipcar looks very well-placed to benefit from this deal. On one hand, the acquisition has placed Hertz in a position to focus on its traditional rental business, while on the other, it has opened the door for other players to approach Zipcar as an interesting buyout target. Zipcar is a more appealing candidate now. The concept of car sharing is more established and known than when the company went public, and the stock is a lot cheaper now.


Consider this: The stock saw a high of $22 in the past year and is currently trading near its 52-week low of $6.40. The timing is perfect for potential suitors to analyze and bid for the company for further consolidation in the market.


We currently have a Trefis price estimate of $11 for Zipcar.

Tags: HTZZIP
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