Uber Technologies is selling a stake in its Uber Freight truck brokerage arm for $500m to investors in a funding round led by Greenbriar Equity Group, pumping fresh cash into a business that has been growing rapidly while also losing money at a fast clip.

The planned investment comes as the coronavirus pandemic has hammered Uber’s core ride-hailing business, prompting the company to slash jobs and re-evaluate cash-burning businesses such as Freight, which accounts for a small portion of Uber’s overall revenue.

The new investors are coming in through what Uber Freight says is a Series A preferred stock financing. The investment values the business at $3.3bn after the funding round.

Two managing partners at Greenbriar, a NY-based midmarket private equity firm focused on logistics and transportation, will join Uber Freight’s board of directors as part of the deal, which Uber said was expected to close this month.

Uber declined to name the other investors.

The transaction would provide Uber with an infusion of capital as the company pushes to cut costs and complete a $2.65bn all-stock deal to acquire food delivery rival Postmates that is expected to close next year.

It would give Uber Freight the benefit of Greenbriar’s logistics expertise as it scales up its digital freight operation, which uses technology to match truckers with shippers who need to move cargo.

“This significant statement of commitment is clearly saying we’re here for the long run,” Lior Ron, head of Uber Freight, said in an interview. “This is the next chapter for us.”

Uber Freight has grown rapidly in recent years, rolling out new logistics services as it gains market share from traditional freight brokers and from digital rivals including Convoy and Transfix. Its customers include large shippers like Anheuser-Busch InBev and Nestlé.

But profit has remained elusive, and Uber Freight remains a relatively small player compared with the biggest operators, such as C.H. Robinson Worldwide, the largest broker in North America.

Uber Freight generated $211m in revenue in the second quarter, up 27% from the previous year and accounting for about 9.4% of Uber’s total revenue for the quarter. The logistics arm reported an adjusted net loss of $49m compared with a $52m loss in the same period in 2019.

Uber recently pulled out of the freight brokerage business in Europe, where the venture was relatively new and more capital-intensive. In September, Berlin-based sender said it acquired that business in an all-stock transaction, with Uber to take a minority stake in the digital freight forwarder.

Uber decided to retain control of its more mature North American business, which performed better this year than the company had modeled, according to a person familiar with the matter.

Ron said Uber Freight has never been “on the docket” for sale.

The freight business is benefiting from high demand for truck transportation, Ron said. What he called Uber’s “adjustments across the board” during the pandemic, including reductions to the operating team in the US, “allowed us to just be more efficient going forward,” he said.

Uber Freight’s technology and Greenbriar’s expertise in the sector “make for an ideal partnership to accelerate Uber Freight’s already significant pace of growth,” Greenbriar managing partner Michael Weiss said in a statement. “We see the increasing rate of digital penetration in logistics as one of the key trends reshaping industrial and consumer supply chains.”

Source: Wall Street Journal

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