DoorDash to acquire Instacart for $17bn

DoorDash has agreed to acquire grocery delivery app Instacart in a $17bn deal that further consolidates the fiercely competitive food delivery sector.

The San Francisco-based company said on Thursday that it would pay $65 a share to buy its rival, a roughly 26 per cent premium on Instacart’s closing price before rumours of a merger emerged in mid-October.

About 75 per cent of the transaction will be paid in cash, with the company securing a bridge loan from JPMorgan to help finance the transaction. The remaining portion of the deal will be paid in DoorDash stock.

A merger is intended to give DoorDash access to Instacart’s marketplace and retailer ties, at a time when it has sought to double down on its own network of fulfilment centres and DashMart grocery stores to complete customers’ orders.

“Grocery is one of the hardest things to get right online. Someone has to pick a ripe avocado, find a substitute you’d choose yourself, and get the ice cream to you before it melts,” said Tony Xu, co-founder and chief executive of DoorDash. “Instacart has spent years learning to do that well for grocers.”

Apoorva Mehta, founder of Instacart, said the companies had explored a merger in the past. “We kept coming back to because the industrial logic has always been clear,” he said.

The deal marks the latest consolidation of the global grocery and food delivery market following the acquisition of UK-based Deliveroo last year for £2.9bn.

It follows Dutch group Prosus’ acquisition of Just Eat Takeaway for €4.1bn in February last year and Uber’s nearly $15bn deal earlier this year to acquire Berlin-based Delivery Hero.

Shares in Instacart, which trades as Maplebear, fell more than 2.5 per cent following the announcement in pre-market trading. DoorDash was up as much as 10 per cent.

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Representatives for Instacart approached large rivals Uber and DoorDash about a potential sale earlier this year, according to people familiar with the matter. Both companies have sought to make inroads in the grocery delivery market.

The Information first reported the approaches. Uber declined to comment.

The two companies would also combine at a time of growing threats due to the advent of personal AI agents, including Meta Muse and OpenAI’s Dot, which are adept at online shopping on behalf of their users.

Analysts at Citi previously said that Instacart was worth about $13.3bn with the company’s supplier base heavily concentrated in a handful of large retailers who could create their own rival service.

The company also faces competition from ecommerce giant Amazon and Walmart, both of which are seeking to make inroads in the grocery delivery market.

DoorDash’s deal for Instacart could also face regulatory scrutiny given the narrow market that exists for third-party grocery delivery services. The company said the deal would lower subscription costs for users and committed to not forcing suppliers to work on an exclusive basis.