Strategic expansion: Budget Saudi acquires AutoWorld

United International Transportation Company or Budget Saudi, a comprehensive provider of mobility solutions in the United Kingdom, has 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 landmark 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 AGM, 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 Stock Exchange upon completion of the necessary procedures with the stock exchange and Securities Depository Center Company. . The new shares represent 8.96% of the share capital of Budget Saudi after the capital increase. Once the new shares are issued in favor of SEDCO Holding, a Saudi institutional Shariah investor with deep experience and a solid track record in investing in national champions, it will directly and indirectly own 8.96% of Budget Saudi. AutoWorld shares will be transferred from SEDCO Holding to Aljozoor Alrasekha, a wholly owned subsidiary of Budget Saudi.

Fawaz Danish, Chairman and Group 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 transport sector and the thriving tourism industry. This deal, the first of its kind in the history of Budget Saudi, allows us to lay the foundations for strategic initiatives that drive sustainable growth, enhance competitiveness and create shareholder value.”

With this acquisition, Budget Saudi will strengthen 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 size of 14,000 vehicles brings Budget Saudi’s total car leasing fleet to 49,300 (based on fiscal year 2023 figures), representing a strategic move to strengthen Saudi Arabia’s car leasing market and improve service quality in the transportation sector in evolution.

Furthermore, this acquisition strengthens Budget Saudi’s market share in the business-to-business and business-to-government segments, where its management foresees significant growth potential driven by a market shift from asset ownership models to of use. In addition, it improves its ability to set competitive prices, improving overall profitability in the medium and long term.

The acquisition is set to expand Budget Saudi’s customer base, 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 wider range of customer needs and preferences. This diversification helps mitigate the risks associated with market fluctuations and changing consumer preferences.

After the acquisition, Budget Saudi plans to merge the Payless brand, a short-term car rental business, with AutoWorld to attract more price-conscious customers, including residents, business and leisure travelers, further diversifying its portfolio of customers. .

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 better fleet utilization, streamlined procurement, increased negotiating power with major suppliers, insurance providers and other suppliers, and consolidated administrative functions.

The combined entity will benefit from streamlined operations and shared resources, reducing redundant costs and increasing overall agility and responsiveness to market demands. Based on independent third-party expert estimates, the company anticipates realizing significant recurring cost synergies per year beginning in the third year following the integration.

AutoWorld is a profitable company with a healthy profit margin in line with industry averages. This acquisition is expected to be EPS positive after integration. Company management anticipates achieving debt cost savings through better terms on AutoWorld’s existing debt. Following the integration and realizing cost synergies, Budget Saudi expects AutoWorld’s net profit to expand further, enhancing future consolidated net profits and margins.

The integration of two well-known and reputable 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 increase customer satisfaction and loyalty, contributing to long-term revenue growth.

Saudi Arabia’s budget has seen a substantial increase in revenue and its fleet. 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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