DoorDash Announces $17 Billion Acquisition of Instacart, Shares Surge While Instacart Stock Falls

Deep News10-30 00:40

In Miami Beach, Florida, a DoorDash delivery rider.

DoorDash, Inc. (NASDAQ: DASH) announced Thursday morning that it will acquire Instacart, Inc. (Maplebear Inc.) (NASDAQ: CART) in a deal valued at $17 billion.

DoorDash, which primarily operates in the restaurant delivery business, is offering $65 per Instacart share, representing a 26% premium over the stock's closing price on October 22. The transaction will be paid 75% in cash; Instacart shareholders can choose cash, DoorDash stock, or a combination of both. According to the press release, Instacart's board of directors unanimously approved the deal.

DoorDash CEO Tony Xu said in the announcement: "Online grocery delivery is one of the hardest businesses to get right. Instacart has spent years building sophisticated online grocery capabilities for supermarkets, while DoorDash has built a delivery network and technology that local merchants rely on heavily. Together, we can offer merchants of all sizes more tools and unlock the potential of the grocery delivery industry."

Following the news, DoorDash shares surged more than 5%, while Instacart shares fell 1.5%.

The acquisition comes against the backdrop of Walmart and Amazon constantly fighting for grocery delivery market share, especially in the same-day and one-hour rapid delivery segments.

Ahead of the disclosure, Wedbush analyst Igal Arounian said the merger of DoorDash and Instacart "could create a differentiated competitive advantage."

"A strong restaurant delivery business combined with Instacart's marketplace that aggregates various supermarkets will be a key bargaining chip against Walmart and Amazon, both of which have been ramping up their grocery delivery efforts," Arounian said.

According to Wedbush data, Walmart currently holds approximately 30.9% of the online grocery market, with Amazon close behind at about 23.6%.

Regarding consumer concerns about whether the acquisition will affect pricing, both companies stated that users can enjoy two membership benefits for a single membership fee while having more shopping choices. The announcement stated: "Instacart's existing platform hosts nearly 100,000 stores. After the merger, its users will have access to an additional 50,000-plus stores to shop from."

For local merchants, the company said the merger will bring more revenue channels for businesses.

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