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Uber to Buy TPG Freight Firm Transplace for $2.25 Billion

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(Bloomberg) -- Uber Technologies Inc. agreed to acquire Transplace, a logistics company owned by TPG Capital, for $2.25 billion in the ride-sharing company’s biggest bet on the trucking business.

The deal is designed to help Uber’s freight arm break even more quickly, the San Francisco-based company said in a statement Thursday. Uber Freight will turn its first adjusted earnings before interest, taxes and other expenses by the end of next year, the parent company said. The unit generated $995 million in revenue last year.

TPG will receive as much as $750 million in Uber stock and the rest in cash. The transaction is expected to close this year or in the first half of 2022, according to a company presentation. Uber’s shares rose 1.2% to $48.07 at 1:35 p.m.

With Transplace, Uber Freight will expand beyond brokering loads between shippers and truckers and into more complete management of a company’s logistics needs, said Lior Ron, head of Uber Freight. Those added services fit with Uber’s recent push into last-mile delivery of food and packages, he said.

“It’s about bringing an end-to-end supply-chain offering from the first mile to the middle mile to the last mile and doing that globally,” he said in an interview. “That’s the focus.”

What Bloomberg Intelligence says:

“This is probably an attempt to diversify its revenue base since demand for ride-sharing may remain subdued during the pandemic. With top-line growth likely to taper in its Delivery segment amid a pull-forward last year and tougher comparisons, we believe the deal is mostly aimed at bolstering inorganic growth as there’s no revenue synergies across segments.”-- Mandeep Singh, BI technology analyst

Click here to read the research.

Uber’s relationship with TPG dates back to at least 2013, when the private equity firm made an early investment in the ride-hailing company. Uber moved into trucking after acquiring Otto, a startup developing technology for self-driving trucks. That transaction, which took place in 2016, landed Uber in a contentious battle with Alphabet Inc.’s Waymo over allegations that the technology was based on stolen trade secrets.

Last year, Uber offloaded the autonomous driving business but kept freight. Uber Freight pairs trucking companies with those seeking to transport loads. Uber said this month that it’s expanding to smaller freight loads. Thursday’s deal signals the importance of this often-overlooked part of Uber’s business.

Uber expects to apply its expertise on data science, marketplaces and machine learning to enhance Transplace’s technology, making shippers and truckers more efficient, Ron said. Uber Freight has, for example, used such tools to cut in half the number of empty trailers that are hauled back, he said.

“This will be a very unique technology offering that will cover the full suite of needs of the shipper across the supply chain,” Ron said.

Transplace was formed in 2000 with contributions from some of the largest trucking companies. TPG Capital acquired the company in 2017. Uber said Transplace will help it attract more customers, especially in Mexico. Transplace posted a cash profit of $77 million last year and is expected to generate more than $100 million this year.

The sale exceeds earlier expectations for Transplace. Bloomberg reported in February that TPG was considering a sale of the operation for about $1.8 billion.

(Updates with Uber Freight chief’s comments in fourth paragraph.)

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