Strategic expansion: Budget Saudi acquires AutoWorld

United International Transportation Company, or Budget Saudi, a full-service mobility solutions provider in the Kingdom, announced the acquisition of Al-Jazira Equipment Company, known as AutoWorld, a vehicle leasing company owned by SEDCO Holding.

Budget Saudi shareholders voted in favor of the acquisition at the Extraordinary General Meeting held on June 24. This historic decision marks a significant milestone in the history of Budget Saudi and paves the way for strategic expansion in a dynamic market poised for healthy growth.

Following shareholder approval at the EGM, 7 million fully paid-up ordinary shares will be issued by Budget Saudi to SEDCO Holding and are expected to begin trading on the Saudi Exchange upon completion of the necessary procedures with the exchange and the Securities Depository Center Company. The new shares represent 8.96 percent of Budget Saudi’s share capital following the capital increase. Once the new shares are issued to SEDCO Holding, a Saudi Shariah institutional investor with deep expertise and a solid track record of investing in national champions, it will directly and indirectly own 8.96 percent of Budget Saudi. The AutoWorld shares will be transferred from SEDCO Holding to Aljozoor Alrasekha, a wholly-owned subsidiary of Budget Saudi.

Fawaz Danish, Group Chairman and CEO, Budget Saudi, said: “The strategic acquisition of AutoWorld provides a solid platform for future growth opportunities, supported by Saudi Arabia’s strong real economy, structural changes in the transportation sector and the thriving tourism industry. This deal, the first of its kind in Budget Saudi’s history, enables us to lay the foundation for strategic initiatives that drive sustainable growth, improve competitiveness and create shareholder value.”

With this acquisition, Budget Saudi will consolidate its position as a market leader in the Kingdom’s long-term vehicle rental and leasing market. According to a credible third-party market report, the acquisition will increase the company’s market share from approximately 12 percent to 18 percent. AutoWorld’s fleet size of 14,000 vehicles brings Budget Saudi’s total auto leasing fleet to 49,300 (based on FY23 figures), representing a strategic move to consolidate Saudi Arabia’s auto leasing market and improve service quality in the evolving transportation sector.

Furthermore, this acquisition strengthens Budget Saudi’s market share in the business-to-business and business-to-government segments, where its management expects significant growth potential driven by a market shift from asset ownership to user models. It also enhances its ability to set competitive pricing, improving overall profitability in the medium and long term.

The acquisition is intended to broaden Budget Saudi’s customer base by providing access to new customers in key industry verticals such as oil and gas, among others where AutoWorld has a strong presence. By acquiring a competitor with a complementary fleet and service offerings, Budget Saudi can diversify its portfolio, meeting a broader range of customer needs and preferences. This diversification helps mitigate risks associated with market fluctuations and changing consumer preferences.

Following the acquisition, Budget Saudi plans to merge its Payless brand, a short-term car rental business, with AutoWorld to appeal to a more price-conscious clientele, including residents, business travelers and tourists, further diversifying and expanding its customer base.

The acquisition will unlock significant cost synergies, reduce redundancies and achieve economies of scale, leading to improved profitability in the medium to long term. These efficiencies extend to improved fleet utilization, procurement optimization, increased negotiating power with key suppliers, insurers and other vendors, and consolidated administrative functions.

The combined entity will benefit from streamlined operations and shared resources, reducing redundant costs and improving overall agility and responsiveness to market demands. Based on estimates from independent third-party experts, the company expects to achieve significant annual recurring cost synergies from the third year onwards after integration.

AutoWorld is a profitable company with a healthy profitability margin in line with industry averages. This acquisition is expected to be accretive to EPS post-integration. The company’s management expects to realize debt cost savings through improved terms on AutoWorld’s existing debt. Post-integration and once cost synergies are realized, Budget Saudi expects AutoWorld’s net income to expand further, improving future consolidated net income and margins.

The integration of two well-known and renowned brands will lead to a stronger and more unified market presence. By harmonizing the best practices and value propositions of both companies, Budget Saudi aims to improve customer satisfaction and loyalty, contributing to long-term revenue growth.

Budget Saudi has seen substantial growth in its revenue and fleet. As part of its growth strategy, and in accordance with Vision 2030, the company has launched a series of sustainable green initiatives to reduce the carbon footprint of its fleet.

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