Some more feedback on the Uber Freight-Transplace deal

As the initial shock, or surprise, of last week’s announcement that San Francisco-based Uber Freight, a subsidiary of the ubiquitous, ride-sharing service Uber, whose proprietary app matches trucking companies with loads to haul, announced it is acquiring Frisco, Texas-based Transplace, a non-asset-based third-party logistics services provider, for roughly $2.25 billion and consisting of up to $750 million in common stock of Uber, there has been no shortage of reaction to this deal.

We will get to some of those reactions in a minute, but below is a quick Q&A with Transplace about it and what it means for the company.

LM: What are the main benefits of this deal for Transplace customers i.e. shippers?

Transplace: The combination of Uber Freight and Transplace brings together complementary best-in-class solutions and operational excellence from two premier companies. Once the acquisition is approved, they will transform shippers’ entire supply chains, delivering operational resilience as well as reducing costs.

Transplace’s shipper customers will have access to an even more robust set of technology solutions across all transportation modes and services. Uber’s advanced technology and data science expertise will elevate customer support services.

LM: What are the main competitive advantages of this deal from a Transplace perspective?

Transplace: The acquisition will bring together Uber Freight’s vast network of digitally-enabled carriers and Transplace’s trusted shipper technology and operational solutions. The combined, fully scaled logistics platform will serve the evolving needs of both shippers and carriers, which delivers on a core Transplace value and commitment to thrilling the customer.

This is an exciting time for Transplace as Uber Freight’s offering complements our logistics solutions. Together, shippers and carriers will benefit from an expanded technology suite that will enable a new era of logistics productivity and transparency. 

LM: What are the next steps, in terms of integration plans and things like that?

Transplace: Once the acquisition goes through the customary regulatory approval process, both teams will begin to work together in a collaborative and thoughtful manner to integrate processes and systems.

LM: What does Uber Freight bring to Transplace that was not previously part of the Transplace service portfolio?

Transplace: Since launching in 2017, Uber Freight has built one of the world’s largest digitally-enabled carrier networks. With over 70,000 carriers in its network, Uber Freight has transformed entrenched practices around pricing and booking freight to reduce inefficiencies and increase opportunities for business growth and industry collaboration.

When the transaction is completed, carriers will have the ability to collaborate directly with shippers within a seamless marketplace. They’ll be able to access high quality freight across multiple expanded service lines, including intermodal, cross border and Less-Than-Truckload.

Uber Freight’s brokerage will continue to operate independently from Transplace’s managed transportation services to ensure the highest-quality service for shippers.

Now, for some of the feedback related to this big deal.

“This appears to be a great strategic move for Uber Freight,” said a supply chain consultant. “It broadens and deepens their footprint by adding one of the premier—if not the premier—North American 3PLs. Transplace was always a technology leader, but since the TPG acquisition [Transplace was acquired by TPG Capital, the private equity platform of alternative asset firm TPG capital in 2017] has been even more emphasis on growing the tech side of the business by adding robust capabilities. As consultants, we always preached that technology was going to outstrip all other aspects of transportation management in terms of gains in productivity and capabilities for better serving customers.  I think Transplace, over the past three years or so has proven that true.”

The consultant added that as in any acquisition, successful integration is critical in maintaining and growing the customer base and the talent pool, pointing out that Transplace has a long history of successful acquisitions and the smooth integration of those entities into Transplace.  

“Those skills should prove useful as they are absorbed into Uber Freight,” he said.

Morgan Stanley transportation analyst Ravi Shanker wrote in a research note that this news follows Uber Freight’s recent announcement that they would be expanding into LTL as they work towards becoming a “one-stop shop for freight” and is on par with the recent trend of digital brokers coming together such as Convoy and Flexport announcing their strategic partnership in June.

“We see the strategic rationale for the transaction, though we are a little surprised to see Uber Freight acquire a managed transportation company rather than another digital broker—though this does expand their product offering and market position, and we believe it could significantly accelerate their path to profitability,” noted Shanker. “On the other hand, we are not surprised to see M&A in the space—we believe the digital brokerage market is at the point of seeing some leading players break out from the pack and this could drive consolidation and partnerships as leaders seek to reinforce their market position. We believe the deal—together with the Uber Freight operation now turning profitable—likely reinforces Uber Freight’s position as a core business within Uber.

Needless to say, there are many more observations, regarding this deal, that could be highlighted, and, at some point, they may appear in this space. But, for now, these seem to get the job done, in pointing to the magnitude of this deal and what the trickle-down effect, so to speak, could be on the market. While it is still too early to tell on that front, it likely will not be all that soon.