United International Transportation Company or Budget Saudi, a comprehensive mobility solutions provider in the 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 favour of the acquisition at the Extraordinary General Meeting on June 24. This landmark decision represents a significant milestone in Budget Saudi’s history and paves the way for strategic expansion in a dynamic market poised for healthy growth.
Following shareholder approval at the Extraordinary General Meeting, 7 million fully paid ordinary shares of Budget Saudi will be issued to SEDCO Holding and are expected to be traded on the Saudi Stock Exchange following completion of the necessary procedures with the Stock 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 in favor of SEDCO Holding, an institutional investor governed by Saudi Shariah law with extensive experience and a strong track record of investing in national champions, it will directly and indirectly own 8.96 percent of Budget Saudi. AutoWorld’s 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 the strong Saudi 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 will drive sustainable growth, improve competitiveness and increase shareholder value.”
With this acquisition, Budget Saudi will consolidate its position as a 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. With a fleet size of 14,000 vehicles from AutoWorld, Budget Saudi’s total car leasing fleet increases to 49,300 vehicles (based on FY 2023 figures). This is a strategic move to consolidate the car leasing market in Saudi Arabia and improve service quality in the developing transportation sector.
In addition, this acquisition strengthens Budget Saudi’s market share in the business-to-business and business-to-government segments, where management sees significant growth potential through a market shift from asset ownership to usage models. In addition, it improves the company’s ability to set competitive prices, improving overall profitability in the medium to long term.
The acquisition is expected to expand Budget Saudi’s customer base and provide access to new customers in key industries such as oil and gas, where AutoWorld has a strong presence. By acquiring a competitor with complementary fleet and service offerings, Budget Saudi can diversify its portfolio and cover a wider 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 company, with AutoWorld to target more value-conscious customers, including locals, business travelers and leisure travelers, thereby further diversifying and expanding its customer portfolio.
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 efficiency gains include better fleet utilization, optimized procurement, improved negotiating position with key suppliers, insurance providers and other vendors, and consolidated administrative functions.
The combined company will benefit from optimized operations and shared resources, reduce redundant costs and improve overall agility and responsiveness to market demands. Based on estimates by independent third-party experts, the company expects to realize significant recurring cost synergies annually starting in the third year after integration.
AutoWorld is a profitable company with a healthy profit margin in line with the industry average. This acquisition is expected to be accretive to earnings per share following integration. The company’s management expects to save on debt costs through better terms on AutoWorld’s existing debt. Following integration and upon realization of cost synergies, Budget Saudi expects AutoWorld’s net profit to continue to increase, improving future consolidated net profits and margins.
The integration of two well-known and reputable brands will result 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, thereby contributing to long-term revenue growth.
Budget Saudi has experienced significant growth in revenue and 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.