DoorDash will acquire Instacart for about $17 billion, the companies announced Thursday, uniting two delivery giants under one roof.
DoorDash will pay $65 a share in cash and stock, an 11% premium to Instacart's closing price on Wednesday, and about 26% above Instacart's closing price on Oct. 22, the last trading day before reports surfaced of a possible sale.
Shares of DoorDash jumped more than 8% in premarket trading following news of the deal, while Instacart traded near the flatline.
The deal is slated to close at the end of 2027 or early 2028, the companies said. DoorDash expects to retain Instacart's brand, enterprise technology products and app once the deal closes.
DoorDash CEO Tony Xu said in a statement that grocery is "one of the hardest things to get right online." He pointed to difficulties around picking the right inventory and delivering perishable goods to customers' doorsteps without damaging them on the way.
"Instacart has spent years learning to do that well for grocers, while DoorDash has built a delivery network and technology that local stores rely on every day," Xu said. "Together, we could give stores of every size more of those tools and unlock the potential of grocery delivery."
DoorDash reported its third-quarter results alongside the deal announcement. Adjusted earnings per share were $1.06, beating the average analyst estimate of 84 cents per share, according to LSEG. Revenue came in at $4.62 billion, topping LSEG estimates of $4.56 billion.
Marketplace gross order value, which tracks the total dollar value of orders on its platform, grew 36% year over year to $33.9 billion, beating consensus estimates of $33.6 billion. Total orders reached 993 million, up 28% from a year ago.
Speculation of a deal has swirled since last week, when The Information reported Instacart was exploring a sale and had held talks with companies including Uber and DoorDash. On Monday, several outlets reported DoorDash was in advanced discussions to acquire Instacart and that the deal could value Instacart at about $17 billion.
Sources familiar with the matter had told CNBC on Wednesday that the deal could be announced as soon as Thursday morning.
Acquiring Instacart would give DoorDash a bigger presence in online grocery delivery. DoorDash got its start in food delivery, and since then, it has added more retailers to its marketplace, such as Sephora, Macy's, Staples and Anthropologie. It's recently made grocery a bigger priority, adding a stable of regional grocers after announcing a partnership with Kroger last year.
Instacart, which went public in 2023, was one of the biggest beneficiaries of a pandemic-driven surge in grocery delivery services, but it has struggled to maintain that momentum. In December Instacart agreed to pay $60 million to settle allegations by the Federal Trade Commission that it misled users with false advertising and deployed "unlawful subscription enrollment" practices.
The service has also faced increasingly stiff competition from companies like Amazon and Walmart. After slowing its brick-and-mortar grocery effort, Amazon has doubled down on its online grocery business and leveraged its vast fulfillment footprint to speed up deliveries of household essentials, pantry staples and perishables.
Both Amazon and Walmart have pushed further into same- and next-day delivery, which poses a threat to Instacart and DoorDash's on-demand delivery model.
Analysts have noted that a potential combination of Instacart and DoorDash could attract antitrust scrutiny given the companies' market overlap.
Third-party delivery platforms "remain a minority of total grocery consumption, but slicing and dicing the online market more narrowly or from a perspective of the grocers as enterprise customers can make approvals more challenging," Wedbush analysts wrote in a Monday research note.
-- CNBC's MacKenzie Sigalos contributed to this report.
