Wednesday, January 02, 2013

Avis - Zipcar acquisition faces legal roadblock

Longtime car rental company Avis has acquired Zipcar -- or not. Soon after news of the $500 million ($12.25 per share) acquisition emerged, Zipcar shareholders cried foul.

Powers Taylor, a securities litigation firm, along with Willie Briscoe (the ex-U.S. SEC attorney, of the Briscoe Law Firm, PLLC), today announced that they would be investigating and possibly filing a lawsuit which would the deal. Briscoe's statement:
Due to the proposed sale price, the size of the deal and other factors, we believe this transaction may undervalue Zipcar’s stock. Our proposed lawsuit will seek to obtain the highest share price for all shareholders.
There is some math behind the potential litigation. That $12.25 per share price is below Zipcar’s 52-week high of $16.25 per share. However, as of 8:30 a.m. PST on Wednesday, Zipcar's stock price was at $12.24, but that was up $4.00 from its last closing price.

In addition, Zipcar has lost nearly two-thirds of its post-IPO value (April 2011), when it was trading as high as $27.96. Its IPO price had been set at $18.

The lawyers have begun appealing directly to Zipcar shareholders, issuing a press release asking them to contact Powers Taylor or Willie Briscoe. Contact details for those interested are in the full release here.

As of Sept. 30, 2012, Avis had cash and equivalents of approximately $554 million. Its market cap is currently around $2.1 billion.

The company said it expects to generate $50 to $70 million in "annual synergies" from the deal. Unless a lawsuit is filed and blocks the acquisition, the deal is expected to close in the spring of 2013.

Interestingly enough, Zipcar’s NASDAQ ticker symbol is ZIP, while Avis' is CAR. We can see there are synergies that exist already, since the two tickers, combined, would be ZIPCAR (no, we don't expect them to change the ticker symbol).

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