- Uber announced it has acquired logistics technology company Transplace for $2.25 billion.
- Transplace could bolster Uber Freight’s recent move into more premium trucking services.
- Executives and analysts said the move is key to putting Uber Freight on the road to profitability.
Uber Freight, the ride-hail giant’s trucking division, announced Thursday it has acquired logistics technology company Transplace from TPG Capital for $2.25 billion.
The move represents a sizable investment in a unit that made up just 1.5% of Uber’s bookings revenue for the first quarter of 2021, and could be what sets Uber Freight up to turn a profit in 2022, according to the company.
Uber Freight head Lior Ron told Insider the transaction marks a “massive commitment” from Uber CEO Dara Khosrowshahi and the company’s board of directors in the freight business, which was a bastion of growth (along with consumer deliveries) as the rides business faltered during the pandemic.
Uber Freight posted roughly 30% growth or more in each quarter of 2020 — a banner year for trucking tech — and a 52% jump in gross bookings for the first quarter of 2021.
Transplace helps companies outsource their transportation. Retailers and manufacturers like Del Monte, Nestlé, Kellogg, and Campbell hire it to handle the logistics of getting their goods from place to place. The company manages approximately $11 billion in freight per year, according to its website, and is a top 20 US logistics provider, according to Transport Topics.
The acquisition consists of $750 million in stock and the remainder in cash. TPG acquired Texas-based Transplace from Greenbriar in 2017 in a deal worth close to $1 billion, according to the Wall Street Journal. Uber Freight took in a $500 million equity investment from Greenbriar at the end of 2020.
“This is a transformative deal,” Benjamin Gordon, CEO of Cambridge Capital, a private equity firm focused on supply chain investments, told Insider. To date, Uber Freight has simply been a freight broker connecting drivers with available loads. Now, it has its own logistics platform.
Combining Transplace and Uber Freight will give Uber a stronger link to the cargo owners who ship the goods and move the entity closer to end-to-end logistics capability.
“We have a mission to be supply chain partners for all modes,” Ron said.
That mission, too, moved forward last week when Uber Freight announced its entrance into less-than-truckload freight through a partnership with Blue Grace Logistics. Morgan Stanley analysts called the move a “natural next step.”
LTL is a complex segment of trucking that demands more expertise and higher pricing.
“LTL contracts are very difficult to get, but very profitable,” Charley Dehoney, CEO of digital freight marketplace FreightMango told Insider. Some $1 billion of Transplace’s $11 billion in freight under management comes from LTL shipments, according to a spokesperson.
Though Uber is a big name in tech, food deliveries, and rides, it’s a relatively new player in the freight world, having launched in 2017. As a middleman in the trucking industry, the more business Uber can offer to carriers, the better pricing it can get and offer to customers. But Ron said the companies would continue to operate separately and not funnel freight from Transplace to Uber Freight where it doesn’t benefit the shipper.
Business News Governmental News Finance News
Need Your Help Today. Your $1 can change life.