Budget Saudi CEO: AutoWorld acquisition marks company’s largest-ever deal, to boost market share

United International Transportation Co.’s (Budget Saudi) acquisition of Al-Jazira Equipment Co. Ltd (AutoWorld) paves the way for a new era of growth opportunities, driven by a robust and strong Saudi economy, President & Group CEO Fawaz Danish told Argaam in an interview.

The structural changes in the transportation sector outlined by Vision 2030 will bolster the Kingdom’s position as a global logistics hub, alongside a flourishing tourism sector,  he added.

Danish said the acquisition will be the largest of its kind in the company’s history if it is completed after fulfilling the required procedures.

This will enable the company to lay the foundations for future strategic initiatives that will advance sustainable growth, enhance the company’s competitiveness, and add value to shareholders.

He added that the deal strengthens Budget Saudi’s position as a leading company in the long-term car lease market in the Kingdom, which will help raise its market share to about 23%. Additionally, it will improve the quality of services in the local transportation sector, which is witnessing significant transformation.

Danish spoke about the anticipated deal and future growth prospects, revealing the company’s strategy to enhance its competitive capabilities and expand its services to reach new segments of customers.

Below are the interview excerpts.

Q: Can you give us the details of Budget Saudi’s deal to acquire AutoWorld?

A: The company has entered into a share swap agreement with the Saudi Economic and Development Holding Co. (SEDCO Holding) to acquire the entire 300,000 shares of AutoWorld, representing 100% of its capital.

The acquisition will be made through Budget Saudi’s wholly owned subsidiary, Aljozoor Alrasekha Trucking Co. (Rahaal), in exchange for the issuance of new shares by Budget Saudi to the shareholders of AutoWorld. Nearly 3.9 million shares will be issued to SEDCO Holding, equivalent to 5% of capital, and 3.09 million shares to First Development Co. (FDC), representing a 3.95% stake.

Accordingly, Budget Saudi’s capital will be increased from SAR 711.67 million to SAR 781.67 million, through the issuance of 7 million ordinary shares, bringing the total number of shares to 78.16 million ordinary shares.

Upon completing the acquisition deal, AutoWorld will operate as an independent entity under Budget Saudi’s management. The acquisition aims to strengthen the company’s position in the market and benefit from the synergies between the two companies.

Q: What competitive advantages will Budget Saudi gain through this acquisition?

A: There are several main reasons that make this acquisition an important and pivotal step in the company’s journey, as it provides a foundation to expand and seize the opportunities available in the thriving economy of the Kingdom, while benefiting from the structural changes in the transportation sector and the significant growth witnessed by the tourism sector.

The acquisition of AutoWorld will also enable us to significantly increase our market share to 23% in the long-term car lease business. This will consolidate our leadership position in the market as the largest car rental company in the Middle East.

After the acquisition, we intend to merge our Payless, a short-term car rental services company, with AutoWorld to benefit from a diverse customer base, including residents, business travelers, and vacation travelers. This will grow and enrich our customer portfolio and enhance its diversity, which will support the more effective relaunch of Payless in short-term car rental activity. This will also enable AutoWorld to develop its brand, expand in the Kingdom and serve a new segment of customers.

Meanwhile, this transaction is a strategic step that will strengthen the car rental market in the Kingdom, while improving the quality of service and competitiveness in the evolving transportation sector.

This acquisition also allows us to reach new customers in vital sectors and diversify our portfolio, thus reducing risks and meeting a wide range of customer needs. Through the integration of two well-reputed brands in the industry, we will work to establish a strong presence in the market, building on the combined strengths of both parties. 

Moreover, aligning best practices and offers of the two companies, as well as leveraging technological capabilities, will enhance customer experiences and operational efficiency, thus increasing customer loyalty and stimulating long-term revenue growth.

Q: What are the expected benefits of integrating Budget Saudi and AutoWorld after the acquisition?

A: AutoWorld operates in the same sector in which we are active; therefore, there are clear complementary aspects such as increasing the size of the fleet, and benefiting from accumulated experiences, including experienced work personnel. Additionally, the acquisition will enable significant cost savings, reduce surplus resources, and benefit from significant economies of scale, leading to improved margins in the medium to long term.

The deal also enables us to increase the efficiency of fleet utilization, improve procurement, and enhance negotiating capabilities with the key suppliers in relation to the purchase of new vehicles, maintenance and spare parts, as well as with insurance providers and other suppliers. The acquisition will also lead consolidate administrative departments, including human resources, finance, IT and other supporting departments. The entity resulting from the acquisition will benefit from improved processes and shared resources, which will not only seek to reduce excessive costs, but also enhance overall flexibility and respond to market requirements based on estimates prepared by independent experts.

Therefore, we expect to achieve savings in recurring costs in the tens of millions during the first three years after the acquisition, while we will begin fully benefiting from the cost reduction by the third year after the concluding deal.

This will have a long-term positive impact on the total independent cost of AutoWorld.

Q: How much is the acquisition expected to contribute to revenue growth and profitability in the short and long terms?

A: In the short term, we expect the acquisition to increase our revenues immediately by integrating AutoWorld’s customer base and fleet operations into our business. We also anticipate a positive impact on profitability through cutting costs and raising operational efficiency, particularly in procurement and fleet management.

In the long term, the acquisition will likely achieve sustainable revenue growth by expanding our market presence, enhancing our service offers, and reaching new customer segments. Over time, we project to see continued improvement in profitability driven by lower costs, improved operations, and enhanced market leadership.

Q: What is AutoWorld's expected role in enhancing Budget Saudi's market share in the commercial transactions sector?

A: We are very confident that this deal is being concluded in ideal conditions, in terms of timing, sector, and favorable conditions that the Kingdom is going through.

Our acquisition aims to benefit from the urban development and continued economic growth in the Kingdom, which will stimulate an increase in demand for transportation services, particularly in major cities by supporting mega projects in which AutoWorld has a strong presence.

This transaction will enhance Budget Saudi’s market share in the transactions sector in both business-to-business (B2B) and business-to-government (B2G) transactions. We expect to reach great horizons and promising opportunities in the market that have not been utilized relatively adequately. This is in addition to the strong growth potential driven by the general trend in the market to shift from asset ownership models to utilization models through leasing contracts.

Furthermore, the Kingdom is currently witnessing a golden period in the tourism sector, especially as it hosts an unprecedented number of international sporting events in conjunction with the sector’s growth momentum. The Kingdom aspires to attract 30 million visitors from pilgrims and Umrah performers and 100 million tourists annually by 2030.

Thanks to the youth demographic and the increase in the number of women entering the labor market and driving cars, we are witnessing a significant development in spending patterns and trends, which contributes to increasing the demand for transportation solutions.

All these factors enhance our capabilities to meet the growing demand for integrated transportation solutions and logistics services by benefiting from strong macroeconomic dynamics and favorable social trends.

    Fawaz Danish CEO of Budget Saudi

source: argaam