DoorDash announced it will acquire grocery delivery company Instacart in a deal valued at $17 billion, The Guardian reported, as the US delivery sector consolidates around a shrinking number of major players. The company will pay $65 per share for Instacart, representing a 26% premium over Instacart's closing share price on 22 October.
The deal is expected to close in late 2027 or early 2028, and the two companies will continue to operate as separate entities until then. DoorDash intends to retain the Instacart brand, app and technology products after the deal closes. Instacart's roughly 600,000 independent contractor shoppers will continue fulfilling orders on the Instacart platform, and grocers may choose to work with either Instacart or DoorDash.
At least 75% of the deal is structured as cash, and Instacart shareholders may choose to receive cash, DoorDash stock, or some mix of the two. Every member of Instacart's board voted in favour of the deal.
Following the announcement, DoorDash shares rose more than 5% while Instacart shares fell 1.5%. This acquisition is the largest DoorDash has made to date.
DoorDash entered grocery delivery in 2020 following a surge in pandemic-related demand, when many grocery chains were initially cautious about partnering with delivery platforms. The company added delivery from Costco recently.
Instacart's share of spending on US delivery platforms has declined from 26% five years ago to 18%, while DoorDash's share grew from 44% to 59% over the same period, according to Consumer Edge. DoorDash's most recently reported revenue grew 34% from a year ago, and its total order volume rose 28%.
DoorDash co-founder and chief executive Tony Xu said in a statement that grocery delivery requires picking ripe produce, finding suitable substitutes and ensuring cold items arrive intact, and that together the two companies could provide stores of all sizes with more tools and realise the potential of grocery delivery.
DoorDash said customers will benefit from more store choices, faster delivery options and access to local savings. The deal will enable more supermarkets to use Instacart's platform to operate their own websites, the company said. Instacart customers will gain access to more than 50,000 additional stores beyond the approximately 100,000 already on the Instacart platform.
On the same day as the acquisition announcement, the Federal Trade Commission disclosed it had opened a pricing probe covering DoorDash, Instacart and seven other companies in the retail and transportation sectors. The deal may attract antitrust scrutiny from government regulators, according to Reuters. Walmart holds approximately 30.9% of the online grocery market and Amazon approximately 23.6%, according to Wedbush, and a Wedbush analyst said before the deal was announced that pairing strong restaurant delivery with a grocery marketplace could prove to be a meaningful competitive edge against the two retailers, both of which are pushing hard into the segment.
After the deal closes, Instacart's roughly 600,000 independent contractor shoppers will continue to fulfil orders on the Instacart platform, and Instacart users will gain access to more than 50,000 stores beyond those already available.
Reporting: The Guardian, Yahoo Finance, BBC
Background: Yahoo Finance
Written by Pick & Scroll News from the reporting and documents linked above.
