Why DoorDash Is Betting $17 Billion on Instacart

DoorDash said it will acquire Instacart for $17 billion as the company looks to hold off Amazon and Walmart in the online grocery delivery space. (Michael M. Santiago/Getty Images)

Key Points

DoorDash agrees to acquire Instacart for $17 billion to hold off competition from Amazon and Walmart.
DoorDash will pay $65 a share for Instacart, representing an 11% premium over Wednesday’s closing price.
DoorDash expects to fund the cash portion of the deal, which is at least 75%, using cash on hand and debt financing.

It’s official.

DoorDash on Thursday agreed to acquire Instacart for $17 billion as the company makes a big move to hold off Amazon.com and Walmart .

DoorDash said it will acquire Instacart for $65 a share, which represents a 11% premium from Instacart stock’s closing price of $58.42 on Wednesday.

The value of the deal also represents a premium of 26% from Instacart’s closing price of $51.68 a share on Oct. 22, which was the last trading day before media reports emerged about a possible transaction.

DoorDash said the deal will be at least 75% in cash and expects to fund that portion with cash on hand and proceeds from debt financing.

DoorDash stock rose 6.2% to $180 in premarket trading on Thursday while shares of Instacart rose slightly to $58.45.

Rival Uber Technologies , which Wall Street had speculated could be in on Instacart, rose 0.4% to $65.53 before the opening bell on Thursday.

The acquisition is quite the move by DoorDash to solidify its dominance in the online grocery delivery space even as Amazon and Walmart have deepened their own investments in that area.

Wall Street’s initial response was to cheer on the acquisition but time will tell if DoorDash can hold off those two titans.

Write to Kit Norton at kit.norton@barrons.com

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