By Anuja Bharat Mistry
Oct 29 (Reuters) – DoorDash said on Thursday it would buy Instacart in a deal valued at about $17 billion, stepping up its push into the fast-growing US grocery delivery market as competition among app-based platforms intensifies.
The deal, DoorDash’s biggest yet, will give the company greater scale as it expands beyond restaurant delivery into groceries and other retail categories, helping it to take on deep-pocketed retailers such as Walmart and Amazon, which have built vast store, warehouse and delivery networks.
“Restaurant delivery is maturing, and growth now lies in more frequent, higher-value orders: weekly grocery shops, convenience items, and retail,” said Martin Szumski, analyst at Morningstar.
Meanwhile, consolidation has gathered pace globally as slowing orders, rising costs and tighter regulatory scrutiny of the treatment of gig workers pile more pressure on the industry.
Instacart founder Apoorva Mehta said the two companies had explored a combination on and off for years.
“Grocery is one of the hardest things to get right online,” said Tony Xu, co-founder and CEO of DoorDash, adding Instacart has spent years learning to do that well for grocers.
Online grocery delivery has also gained traction as consumers increasingly prize convenience, while a recent surge in gasoline prices linked to disruptions from the war in Iran could give shoppers another reason to avoid trips to stores.
INSIDE THE DEAL
DoorDash has offered Instacart shareholders $65 per share held, representing a premium of about 26% to the stock’s closing price on October 22 before reports of deal talks first emerged.
The consideration will be at least 75% cash, with Instacart shareholders able to elect cash, DoorDash stock or a combination of the two, the companies said.
Shares of Instacart, formally known as Maplebear, were flat at $58.35 in early trading. They had hit a record high of $62 on Monday.
DoorDash shares jumped nearly 6% after the company also reported better-than-expected quarterly revenue. They have declined about 25% so far this year through their last close.
REGULATORY HURDLES LOOM
The transaction is expected to close at the end of 2027 or the first half of 2028.
“The main risk is regulatory approval,” analysts at CFRA Research said in a note, adding that the long timeline for the closing of the transaction suggests both sides expect an extended antitrust review.
“The current regulatory backdrop is generally favorable, but the long closing window leaves the deal exposed to changes in policy,” they added.
New York City’s Department of Consumer and Worker Protection (DCWP) said on Wednesday that a potential merger continued a “troubling trend” of corporate consolidation.
DoorDash plans to retain Instacart’s brand and app after the deal closes and combine the companies’ membership programs, while pledging not to require grocers to use its delivery services exclusively.
Instacart would be required to pay DoorDash a termination fee of $650 million, while DoorDash would have to pay $1.25 billion if the deal is ended under certain circumstances, according to a regulatory filing.
(Reporting by Anuja Bharat Mistry and Deepa Seetharaman in Bengaluru; Editing by Sriraj Kalluvila)
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