The cash offer of $12.25 per share -- a premium of 49 percent to Zipcar's Monday close -- will see its largest shareholder, Steve Case, netting about $96 million.

Case's investment firm Revolution held a 19.6 percent stake in Zipcar as of August 28, according to Thomson Reuters data. Revolution owned 17 percent of the company after Zipcar's $18-per-share initial public offering in April 2011. The offer is at a discount of 32 percent to the IPO price.

Zipcar shares were up 48 percent at $12.20 in late afternoon trading on the Nasdaq on Wednesday.

"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.

Zipcar, founded more than 10 years ago, controls about 75 percent of the $400 million car-sharing industry in the United States. Car sharing allows customers to rent cars at an hourly or daily rate and park in convenient reserved spots.

The total car-sharing market is projected to reach $10 billion over the next several years, Nelson said on a conference call with analysts.

Higher demand for car sharing amid rising gasoline prices has also attracted traditional car rental companies such as Hertz and Enterprise.

Zipcar's business is at least five times larger than Hertz's and Enterprise's car-sharing businesses, Needham & Co analyst Kerry Rice said.

Analysts said a counter bid for Zipcar from either Hertz or Enterprise was unlikely.

"Given the premium being paid by CAR and the robust process conducted by ZIP as stated on the conference call, we are placing a low probability on the emergence of a third party bidder," said Paul Coster, an analyst at JP Morgan Securities.

Avis has been relegated to No.3 in the $22 billion U.S. car rental industry after Hertz secured the No.2 spot with its acquisition of Dollar Thrifty Automotive Group in August.

Avis also bid for Dollar Thrifty in 2010, but later dropped out of the race.

DEAL DRIVERS

The deal, expected to close in the spring of 2013, will add to Avis's earnings, excluding items, from the second year and is expected to generate between $50 million and $70 million in annual synergies.

Zipcar will operate as a unit of Avis and Scott Griffith will remain the unit's chief.

The company said it expects to fund the transaction mainly with available cash and additional debt. The company had cash and marketable securities of about $554 million as of September 30.

Zipcar has more than 760,000 members, or Zipsters, with a presence in 20 cities in the United States, Canada and Europe.

Citigroup is advising Avis while Morgan Stanley is advising Zipcar on the transaction.

Avis's shares were up 4.4 percent at $20.69 on the Nasdaq. Hertz shares were up 3 percent on the New York Stock Exchange. (Reporting by Sagarika Jaisinghani, Tej Sapru and Mridhula Raghavan in Bangalore; Editing by Supriya Kurane and Sreejiraj Eluvangal)

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