DoorDash has announced it will acquire Instacart in a deal valued at about $17 billion.
Reuters reports this is the company’s largest acquisition to date. This acquisition strengthens DoorDash’s position in the fast-expanding U.S. grocery delivery market and broadens its operations outside of restaurant delivery.
According to the terms, shareholders of Instacart will receive $65 per share, a premium of about 26% over the closing price of October 22, before the first reports on the talks. At least 75% of the consideration will be paid in cash and the shareholders will be able to choose either cash, DoorDash shares, or a combination of both. The deal is expected to close by the end of 2027 or in early 2028.
“Grocery is one of the hardest things to get right online,” said Tony Xu, co-founder and CEO of DoorDash.
He noted that Instacart has spent years learning how to do that well for grocers. Instacart founder Apoorva Mehta said the two companies had explored a combination on and off for years. According to a source familiar with the matter, talks began over the summer, and in early September Instacart’s CEO signaled that the company was exploring strategic alternatives.
Instacart also held preliminary talks with Uber, but the ride-hailing company ultimately did not pursue a deal, in part because it had announced a $14.8 billion acquisition of German delivery platform Delivery Hero just a few months earlier.
Analysts say restaurant delivery is a maturing market and that growth now lies in more frequent, higher-value orders such as weekly grocery shops, convenience items and retail.
Consolidation is gaining speed in the reportedly stagnant business environment. Orders are slowing, costs are rising, and a stricter regulatory environment is establishing limits on gig workers. Online grocery has gained more traction as more people seemed to value convenience.
The main risk to the deal is regulatory approval. CFRA Research analysts noted that the long closing timeline suggests both sides expect an extended antitrust review. New York City’s Department of Consumer and Worker Protection said a potential merger continued a “troubling trend” of corporate consolidation.
DoorDash plans to retain Instacart’s brand and app after the deal closes and to combine the companies’ membership programs. It has also pledged not to require grocers to use its delivery services exclusively.
Instacart would pay DoorDash a $650 million termination fee under certain circumstances, while DoorDash would pay $1.25 billion if the deal is ended under comparable conditions.
