ShapeUp Inc., which evolved over a decade from a two-person nonprofit to a for-profit technology company in Providence with 134 employees, is evolving again as a Massachusetts company affiliated with British billionaire Richard Branson acquires the firm. Terms were not disclosed.
Virgin Pulse, a Framingham, Mass., company that offers more employee-focused “wellness” options than ShapeUp does, is scheduled to announce Wednesday that it will acquire ShapeUp Inc. and Australian-based Global Corporate Challenge. Virgin Pulse is one of the 200 to 300 companies that compose Branson’s Virgin Group.
The three companies will continue to offer ways for their combined 6,500 business customers to encourage employees to adopt healthier lifestyles. Those customers employ more than 5 million people in 185 countries, according to Virgin Pulse. With the merger, Virgin Pulse said it expects annual recurring revenue to exceed $100 million for 2016.
Locally, ShapeUp founder and CEO Rajiv Kumar hailed this next step for what he and Ray Rickman launched as a nonprofit in 2005.
ShapeUp has created software to help companies lead their employees to make healthy changes. But now, Kumar said, they’ll be able to offer even more to those companies with Virgin Pulse’s lifestyle programs regarding sleep, nutrition and stress.
“For me personally, this deal is a dream come true,” Kumar said in an interview, noting he’ll have a similar role at a much larger organization. “We’re super-charging our company. We’re advancing our mission, and we have the greatest opportunity to become the largest and most successful company in this space.”
Kumar said ShapeUp will continue operating its Providence office, where 92 employees work, and its Boston office with 9 employees. The combined firm will have 11 offices in eight countries in North and South America, Europe and Asia. ShapeUp has an additional 33 employees who work remotely.
The merger will give employees of all three firms opportunities to work in new places and take on different roles, Kumar said. However, over the next few months, about 14 people of a combined 468 employees will lose their jobs because some positions will be redundant, Kumar said. Seven ShapeUp employees — six in Providence and one remote employee — are among those 14, he said.
Kumar said he’s under a non-disclosure agreement that prevents him from talking about the financial details of the merger. However, the private, venture-backed ShapeUp “delivered a very healthy return to all our shareholders, many of whom are Rhode Island angel investors,” Kumar said.
Since 2010, ShapeUp has raised $15 million in venture-capital investment, Kumar said. Two of ShapeUp’s Boston-based investment firms — Cue Ball Capital and Excel Venture Management — will continue to support the combined firm, Kumar said. Virgin Pulse’s acquisition of both ShapeUp and the Australian firm is being funded by private-equity firm Insight Venture Partners, of New York City, which holds a majority stake in Virgin Pulse, Kumar said.
ShapeUp’s five-member board of directors, where Kumar serves as president, will dissolve, but board chairman Tony Tjan will have a seat on the new company’s board, Kumar said. Kumar will not sit on that board, but will take on the new role of president of the combined organization. Kumar will report to the CEO of Virgin Pulse, Chris Boyce.
Virgin Pulse and ShapeUp have competed against each other and have developed a “mutual respect for each other’s mission, vision and business,” Boyce said in an email. Boyce said it’s not uncommon for some worker reduction with such a merger, but the move also means some Virgin Pulse employees who now commute from Rhode Island may work in Providence and some ShapeUp employees who live closer to Framingham may work there. ShapeUp will remain in Rhode Island, he said.