When people asked in the past if Uber Freight fit into Uber’s overall value proposition, the company took bold steps like investing more than $1 billion from outside sources to speed up growth or buying Transplace to combine upstream and downstream parts of the supply chain.
The steps showed that Uber Freight, a digital freight broker, was here to stay as part of Uber’s more extensive business portfolio.
Now, Bloomberg says that Uber is looking into whether it should sell Uber Freight or make it its own public company.
People who know about the situation told Bloomberg that Uber is “talking with possible advisors about its options.” A representative for Uber Freight wanted to keep everything private.
Even though the integration of Transplace was finished by the end of 2021, Uber Freight had a negative earnings before interest, taxes, depreciation, and amortization (EBITDA) in the fourth quarter of 2022. This was after having a barely positive EBITDA in the third quarter ($1 million) and a positive EBITDA of $5 million in the second quarter. In the first quarter of 2022, which was the first to include the Transplace purchase, EBITDA was positive.
In the fourth quarter, Uber Freight’s revenue was down 43% from last year. For the whole year, the company made just under $7 billion. That number would include income from the business Transplace used to run.
One of the anonymous sources that Bloomberg talked to said that a decision on how to move forward “isn’t imminent” but that an IPO would be more likely if the business were to be split off.
If the IPO happened, it would be the first time a digital brokerage company was open to public scrutiny on equity markets. Companies like Convoy, and some of the other big digital brokerages are privately owned.
But J.B. Hunt does show how much money it makes from its J.B. Hunt 360 digital brokerage product in its Integrated Capacity Solutions segments. In 2022, J.B. Hunt (NASDAQ: JBHT) earned $1.52 billion, less than the $1.58 billion it made the year before.
It is unclear how much Uber Freight is worth on Uber’s books. It has made two big investments in the past few years. The first was a $500 million investment from Greenbriar Equity Group in October 2020. In that deal, Uber Freight was worth $3.3 billion.
Abu Dhabi Growth Fund, D1 Capital, and GCM Grosvenor all put another $550 million into Uber Freight in November 2021. The deal to buy Transplace closed simultaneously with that investment, and the funding helped provide the money needed to complete the deal to buy Transplace.
Analyst Justin Post at Bank of America Merrill Lynch was the first to say his thoughts about the possible sale.
In his report, Post said, “We would expect that any possible deal would depend on the market and valuation.”
Regarding valuations, Post pointed to recent comparisons with several companies, but some of them were only vaguely similar; Uber Freight’s model is very different from that of Werner (NASDAQ: WERN) or Knight-Swift (NYSE: KNX). These two companies are truckload carriers that also have a brokerage division. Uber Freight, on the other hand, is a digital brokerage with no physical assets.
But Post also compared with J.B. Hunt and C.H. Robinson (NASDAQ: CHRW), which, in the case of Hunt, has an extensive digital brokerage technology offering and, in the case of Robinson, is the largest broker in the country.
Post used several metrics to figure out that if Uber Freight were sold, it would probably be worth about 1x its estimated revenue for 2024, which he put at about $7.85 billion. He also thought that Uber Freight’s EBITDA would be $139 million this year. This would be a massive jump from how the company ended 2022 when it had EBITDA red ink.
Post wrote that a possible sale of Freight wouldn’t come as a surprise because Uber’s management has been realistic about the company’s assets and willing to sell when competitive advantages or synergies aren’t happening.
When $550 million was put into Uber Freight, it did not have a value. But Morgan Stanley had said a few months earlier that Uber Freight was worth $3.5 billion, up about $200 million from when the Greenbriar investment was announced a year earlier.
Uber Freight recently laid off 3% of its employees. All of the layoffs, which amounted to about 150 people, happened in the brokerage division, not in the business that Transplace used to run.
