DoorDash to buy Instacart in $17bn deal to expand grocery delivery
The all-cash-heavy agreement values Instacart at $65 a share and would be DoorDash's largest acquisition, but Reuters reports it may draw antitrust scrutiny.
At a glance
- DoorDash has agreed to acquire Instacart in a $17bn (£12.8bn) deal, valuing Instacart at $65 a share.
- Instacart shoppers would gain access to 150,000 stores, up from 100,000, while DoorDash expands beyond restaurants into retail.
- Reuters reports the merger may raise antitrust issues; New York City's consumer and worker protection agency criticised the consolidation.
DoorDash has agreed to buy grocery delivery firm Instacart in a $17bn (£12.8bn) deal that would be the delivery platform's largest acquisition to date. The agreement values Instacart at $65 a share — a 26% premium over its closing price on 22 October, the level before news of a possible merger first emerged — and at least 75% of the payment will be in cash, DoorDash said.
The companies expect the deal to be final in about a year, with DoorDash saying it could be completed by the end of 2027 or in the first six months of 2028. Until it closes, the two delivery services will keep operating as independent companies, and DoorDash plans to retain Instacart's brand, app and technology products.
What each side gains
According to the companies, the combination will widen customer choice and give more sellers access to their services. Instacart shoppers would be able to buy from 150,000 stores, up from 100,000 now, while DoorDash would move beyond restaurants into retail.
Instacart chief executive Chris Rogers said the two firms together could "accelerate innovation across the grocery industry and make online grocery more seamless and affordable" for the households they serve. He said Instacart had transformed online grocery over 14 years by helping retailers of all sizes compete and grow.
DoorDash co-founder and chief executive Tony Xu said the acquisition would let his company draw on Instacart's grocery selection and substitution expertise. Grocery is one of the hardest things to get right online, he said, because someone has to pick a ripe avocado, find a substitute a customer would choose and deliver ice cream before it melts. Instacart has spent years learning to do that for grocers, he added, while DoorDash has built a delivery network and technology that local stores rely on.
Market pressure and regulatory questions
Morningstar analyst Martin Szumski told Reuters that the growth area in food delivery is shifting. Restaurant delivery is maturing, he said, and growth now lies in more frequent, higher-value orders such as weekly grocery shops, convenience items and retail.
The tie-up could help DoorDash compete with delivery giants such as Amazon. Reuters also reported that the merger may raise antitrust issues with government regulators.
New York City's commission on consumer and worker protections, which reached a $131.5m settlement with DoorDash last month over allegations that it underpaid workers, said the proposed merger continues what it called a troubling trend of mega-corporations consolidating. The commission said it would fully enforce delivery workers' rights whether or not the merger proceeds.
Source: BBC Business.
Questions and answers
- How much is DoorDash paying for Instacart?
- DoorDash will acquire Instacart for $65 a share in a deal valued at $17bn (£12.8bn). That is a 26% premium on Instacart's 22 October closing price, and at least 75% of the deal will be cash.
- When will the DoorDash and Instacart deal close?
- DoorDash expects the deal to be final in about a year, saying it could be done by the end of 2027 or in the first six months of 2028. Until then, the two services will operate as independent companies.
- Will the DoorDash-Instacart merger face regulatory scrutiny?
- Reuters reported the merger may raise antitrust issues with government regulators. New York City's commission on consumer and worker protections said the proposal continues what it called a troubling trend of mega-corporations consolidating.
