Shares of Hertz Global Holdings, Inc (NYSE:HTZ) and Dollar Thrifty Automotive Group, Inc (NYSE:DTG) rose sharply on Monday this week after Hertz struck an agreement to acquire Thrifty for around $2.6 billion. Speculation of an agreement being reached had surfaced late last week, however, the deal was confirmed by Hertz only on Monday. Hertz had been pursuing Dollar Thrifty over the last five years, and its current bid is more than double of what it had offered over two years ago. The deal makes Hertz the second place car rental company in the U.S. with about 24% market share. So what does the deal mean for the car sharing company Zipcar (NYSE:ZIP)?
Zipcar serves 730K members with a fleet of over 11K vehicles in North America and Europe. Aside from competing with traditional rental companies, it also competes with car-sharing services like Hertz On Demand, Enterprise’s WeCar, UHaul’s UCarShare and City Car Share.
Where does this leave Zipcar?
The company had a rough second quarterly result (announced on August 2), 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 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 (peer to peer) 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 potentially 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 than it was at any point in the past. The concept of car-sharing is more established and known than when it went public, and the stock is a lot cheaper now.
Consider this – the stock saw a high of $22 in the last one year and is currently trading near its 52-wk low of $6.40. The timing is perfect for potential suitors to analyze and bid for the company to see further consolidation in the market.