Why Uber’s new deal comes as a surprise
July 22, 2021
The post-pandemic Uber is certainly not the same business it came in as.
Throughout the pandemic, as its core ride-hailing business flagged, the company focused on the parts of its business that were growing.
That focus, at least in its dealmaking, boiled largely down to prioritizing food delivery. Over the last year, the company under CEO Dara Khosrowshahi has offloaded its air taxi foray as well as its autonomous vehicle initiative that had long been marketed as the key to its future. Instead, it executed a series of deals in the delivery space, snapping up alcohol delivery business Drizly for $1.1 billion in February and acquiring the stake it did not already own in grocery delivery startup, Cornershop, for an undisclosed sum in June.
On Thursday, Uber announced yet another deal hinting at what the company is banking on for future profitability.
But this one was somewhat of a surprise. After focusing so much of its energy on food delivery, the company announced that it had acquired Transplace, a transportation logistics company, through its trucking unit, Uber Freight, for about $2.3 billion in cash in stock.
And there appeared to be signs that Uber was becoming more wary of the Freights business. The acquisition of Transplace, which sells logistics management software and also connects trucks to shippers, comes after Uber sold a $500 million stake in Uber Freight to Greenbriar Equity Group in October. CFO Nelson Chai described the funding as an investment that would allow Uber to “fund freight until it’s profitable” in a call with analysts a month later. But in the same call, an analyst questioned how well the business fit together with Uber’s ride-hailing and food-delivery ones, which can at least share drivers.
Still, even as Uber under Khosrowshahi backs away from Uber’s more far afield bets, he has seen Freights as something of a happy medium. Here he is, responding to that analyst in the November earnings call: “Freight is focused on really delivery from warehouse to store. Eats and our Delivery business is focused on delivery from store to last mile, to home… We’re betting for 3 to 5 years from now where we start chaining together warehouse to last mile.”
Air taxis may be out for Uber, but Freight, it seems, is in.
The acquisition of Transplace meanwhile is one that the company expects to speed up Freight’s “path to profitability.” In the press release announcing the deal, Uber says Freight is expected to breakeven on an adjusted EBITDA basis by the end of 2022.
Jessica Mathews compiled the IPO and SPAC sections of the newsletter.
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