In a push to expand its logistics business, ride-hailing giant Uber has announced a new acquisition by its truck subsidiary, Uber Freight.
Uber reached an agreement to acquire Dallas-based Transplace from TPG Capital, the private-equity arm of investment firm TPG for $2.25 billion. Under the agreement, Uber will pay up to $750 million in common stock of Uber Freight’s parent company and the rest in cash to TPG Capital, according to regulatory filing.
Uber Freight is pushing a tech-enabled method of booking for truck owners, drivers and cargo owners. The digital booking has been successfully implemented by Nigerian-based startups, Kobo360 and Zido Logistics that offer trucking services around Africa. Uber hopes the acquisition will help it reach into the U.S., Canadian and Mexican domestic shipping sectors, its existing markets.
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Uber Freight also sees the acquisition as a means to accelerate the company’s path to profitability and help the segment to break even on an Adjusted EBITDA basis by the end of 2022, according to the company.
The union will fold one of the largest managed transportation and logistics networks into Uber Freight’s platform, which connects truck drivers with shippers that need cargo delivered. Uber Freight’s brokerage will continue to operate independently from Transplace’s services, the company said.
Transplace CEO Frank McGuigan said as a result, the combined company expects shippers will see greater efficiency and transparency. “All in all, we expect to significantly reduce shipper and carrier empty miles to the benefit of highway and road infrastructures and the environment,” he said.
Uber Freight launched in 2017. In August 2018, it was spun off into a separate business unit, a move that simultaneously allowed it to gain momentum and burn more cash. After spinning off of Uber, the freight company underwent an expansion. Uber Freight redesigned its app, an improvement that included adding new navigation features to make searching for and filtering loads easier to customize.
The company expanded to Canada and Europe. Uber Freight also established a headquarters in Chicago as part of its parent company’s broader plan to invest more than $200 million annually in the region, including hiring hundreds of workers. Uber said in September 2019 it would hire 2,000 new employees in the region over the next three years; most would be dedicated to Uber Freight.
Freight provided $302 million in gross bookings of Uber’s overall revenue of $19.5 billion in gross bookings in the three months ending March 31.
Uber sold a stake in the freight business last year when an investor group led by New York-based investment firm Greenbriar Equity Group committed to invest $500 million in a Series A preferred stock financing for the business. The deal valued the unit at $3.3 billion on a post-money basis.
Uber maintained majority ownership in Uber Freight and used the funds gained from Greenbriar to continue to scale its logistics platform, which helps truck drivers connect with shipping companies.
Uber services came under the weight of pandemic-induced restrictions that paralyzed movement, plummeting its revenue.
The San-Francisco-based ridesharing company hopes the new acquisition will accelerate its push for expansion to new territories. But it faces strong competition from traditional middlemen that match freight loads to available trucks and from a lineup of tech-focused startups including Convoy and Transfix Inc.
Uber Freight head Lior Ron said in a statement the combination with Transplace would yield operational excellence.
“This is a significant step forward, not just for Uber Freight but for the entire logistics ecosystem. This is an opportunity to bring together complementary best-in-class technology solutions and operational excellence from two premier companies to create an industry-first shipper-to-carrier platform that will transform shippers’ entire supply chains, delivering operational resilience and reducing costs at a time when it matters most.”