Avis Buys Zipcar For $500 Million in Cash

Car rental company Avis Budget, on Wednesday announced it would purchase Zipcar in an effort to muscle its way into the growing car sharing market.

“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 CEO Ronald Nelson in a statement.

Analysts say Zipcar’s main problem was that it could often not meet the demand of its inventory, especially in urban centers. Cars were often unavailable at peak times and on weekends.

Rental car companies Hertz and Enterprise Rent-a-Car have also entered the growing car sharing market. It’s certainly a profitable venture; when the deal closes for Avis later this year, Zipcar is expected to add to Avis’ annual earnings up to $70 million.

Steve Case, CEO of Revolution LLC, will net a whopping $96 million from the deal, the Wall Street Journal is reporting.