Strategic expansion: Budget Saudi acquires AutoWorld

United International Transportation Company, or Budget Saudi, a British kingdom offering comprehensive mobility solutions, has announced the acquisition of Al-Jazira Equipment Company, known as AutoWorld, a vehicle leasing company owned by SEDCO Holding.

The shareholders of Budget Saudi voted for the acquisition at the extraordinary general meeting held on June 24. This landmark decision marks a major milestone in Budget Saudi’s history and paves the way for strategic expansion in a healthy growth market.

Following the shareholders’ approval, Budget Saudi will issue 7 million fully paid ordinary shares to SEDCO Holding and is expected to start trading on the Saudi stock exchange after completing the necessary procedures with the stock exchange and the Stock Exchange. . The new shares represent 8.96 percent of Budget Saudi’s share capital after the capital increase. Once the new shares are issued in favor of SEDCO Holding, a Saudi Sharia institutional investor with a strong track record of investing in national champions, it will directly and indirectly own 8.96 percent of Budget Saudi. AutoWorld shares will be transferred from SEDCO Holding to Aljozoor Alrasekha, a wholly owned subsidiary of Budget Saudi.

Fawaz Danish, President and CEO of Budget Saudi, said: “The strategic acquisition of AutoWorld provides a solid platform for future growth opportunities, supported by a strong Saudi real economy, structural changes in the transport sector and a booming tourism sector. This agreement, the first of its kind in Budget’s history in the Kingdom of Saudi Arabia, will allow us to lay the groundwork for strategic initiatives that will drive sustainable growth, enhance competitiveness and create shareholder value.”

With this acquisition, Budget Saudi strengthens its position as the market leader in the long-term vehicle rental and leasing market in the Kingdom. According to a credible third-party market report, the acquisition will increase the company’s market share from approximately 12 to 18 percent. AutoWorld’s fleet of 14,000 vehicles will increase Budget Saudi’s total car leasing fleet to 49,300 (based on FY 2023 figures), a strategic move to consolidate Saudi Arabia’s car leasing market and improve service quality in the evolving transportation sector.

In addition, this acquisition strengthens Budget Saudi’s market share in the business-to-business and business-to-government segments, where its management foresees a market shift from asset ownership to user models with significant growth potential. It also improves your ability to price competitively and improve overall profitability in the medium to long term.

The acquisition aims to expand Budget Saudi’s customer base by providing access to new customers in key industries such as oil and gas, among others where AutoWorld has a strong presence. By acquiring a competitor with a complementary fleet and service offering, Budget Saudi can diversify its portfolio and meet a wider range of customer needs and preferences. This diversification helps reduce 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 more price-conscious customers, including the general public, business and leisure travelers, further diversifying and expanding its customer portfolio. .

The acquisition unlocks significant cost synergies, reduces redundancies and enables economies of scale, resulting in improved profitability in the medium and long term. These efficiencies include better fleet utilization, optimized procurement, negotiating position with major suppliers, insurance carriers and other vendors, and consolidated administrative functions.

The combined entity will benefit from optimized operations and shared resources, reducing redundancy costs and improving overall agility and responsiveness to market demands. Based on the estimates of independent, external experts, the company expects significant, recurring cost synergies every year from the third year after the integration.

AutoWorld is a profitable company with healthy profitability ratios in line with industry averages. This acquisition is expected to increase post-integration EPS. The company’s management expects that debt cost savings will be achieved through improved terms on AutoWorld’s existing debt. Following the integration and realization of cost synergies, Budget Saudi expects that AutoWorld’s net profit will continue to expand, increasing future consolidated net profit and margins.

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

The budget’s revenues and fleet in Saudi Arabia have grown significantly. As part of its growth strategy – and in line with Vision 2030 – the company has launched a number of sustainable green initiatives to reduce the carbon footprint of its fleet.

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