Chef to be acquired for $220M by Progress in ‘next chapter’ for Seattle automation tech company

Chef CEO Barry Crist. (GeekWire File Photo / Todd Bishop)

Updated below with details from interview with Chef CEO Barry Crist.

Business application platform Progress will acquire Seattle-based automation technology company Chef for $220 million in cash under a deal announced Tuesday.

It’s a major turn of events for a company that has been a mainstay of the Pacific Northwest tech community for more than a decade. Progress, based in Bedford, Mass., is publicly traded on the Nasdaq. The acquisition “will provide the scale to further drive Chef’s platform forward and deliver additional value to our customers,” said Chef CEO Barry Crist in a statement about the deal.

Progress CEO Yogesh Gupta

Chef raised more than $100 million in funding over its lifetime as a private company from investors including Battery Ventures, Citi Ventures, DFJ, Ignition Partners, and Hewlett Packard Ventures. The 270-person company, founded in 2008 as Opscode, focused originally on DevOps and infrastructure automation before expanding into application automation, compliance and security.

Financial details disclosed with the announcement shed new light on Chef’s business. The company reached more than $72 million in revenue for the trailing 12 months ending June 30, according to an investor presentation released by Progress. More than 95% of Chef’s revenue is recurring, according to the companies.

Chef was cash-flow positive in the first quarter of this year and was on track to achieve its first full year of profitability, Crist told GeekWire in a June interview. The company last year made a series of changes in its executive ranks, including the promotion of product and engineering leader Corey Scobie to chief technology officer after its co-founder, Adam Jacob, stepped down from day-to-day work.

The Seattle company says it has more than 700 corporate customers, including many Fortune 500 companies. Chef has cited companies including Facebook, Ford, General Motors and Nordstrom as customers.

The acquisition, which is subject to regulatory approval, is scheduled to close next month. The integration of Chef will take about 12 months, and should start adding to Progress’ profits by the first quarter of its 2021 fiscal year (ending in February 2021), said Progress CEO Yogesh Gupta in a conference call with analysts and investors Tuesday morning.

“We’ll leverage our operating model and infrastructure to help Chef achieve operating margins of more than 35% once fully integrated,” Gupta said on the call. “We’ve been very transparent about our M&A strategy, and the criteria we use to evaluate opportunities, and Chef checks all the boxes.”

A slide in an investor presentation details the expected impact of the Chef acquisition on Progress’ recurring revenue. (See full slide deck.)

Update, 11 a.m.: With the transaction pending, the companies are not detailing the potential impact of the deal on Chef’s existing employees and its Seattle headquarters. While some Chef leaders will transition to Progress after the acquisition, Crist said in an interview that he and other top executives will leave following the deal.

Details are still being worked out, but he said a core group of senior leaders “will really be the backbone to bring the company and our customers and our community to the other side.”

The acquisition traces its roots back about a year, when the Chef management team and board started talking about the best ways to expand and accelerate the company’s impact on the market, Crist said. They ended up having discussions with private equity investors, as well as public companies. He said Progress and Chef were a match due to a shared vision for expanding in the enterprise market by accelerating the company’s investment in R&D and growth.

One factor that stood out to him, Crist said, was that Progress invests in R&D at a higher level than many of its peers.

Crist, who has been at the company for seven years, previously led enterprise identity and storage company Likewise, which was acquired by EMC/Isilon in 2012. He said he expects to remain involved in the tech industry, but plans to take some time to contemplate his next move after assisting with the transition to Progress.

He described Chef as one of the “foundational plank-holders of the DevOps movement,” praising the company’s employees, community and customers, and calling it a rare opportunity “to be part of something that touched an entire industry.”

Chef is ranked #20 on the GeekWire 200 index of the Pacific Northwest’s top privately held tech companies.

Progress has more than 1,500 employees, posting annual revenue of $413 million and profit of $26.4 million for the fiscal year ended in November. Along with the Chef acquisition announcement this morning, the company announced preliminary results of $108 to $110 million in revenue, and profits of 50 cents to 53 cents per share for its fiscal third quarter, ended in September.

Officially incorporated as Progress Software Corp., the company traces its roots to the early development of application development and deployment tools by Data Language Corp. in the 1980s. Chef would become the latest in a series of acquisitions by the company, which says its goal is to double in size in the next five years. Progress acquired file transfer and network management tech company Ipswitch for $225 million last year in another all-cash deal.

The acquisition of Chef “fills a need in the Progress portfolio in DevSecOps, infrastructure, application, and compliance automation that is highly complementary to its existing products,” Crist said in a statement this morning. “For Chef, this acquisition is our next chapter, and Progress will help enhance our growth potential, support our Open Source vision, and provide broader opportunities for our customers, partners, employees and community.”

Shares of Progress are up 1% in early trading Tuesday morning amid a broader decline in tech stocks.

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