Dive Brief:
- DoorDash plans to buy Instacart for approximately $17 billion, the companies announced Thursday.
- The transaction, which is expected to close at the end of 2027 or in the first half of 2028, values Instacart at $65 per share and represents a 26% premium to Instacart's closing stock price on Oct. 22.
- The merger marks a major consolidation within the e-commerce and technology space for grocers.
Dive Insight:
In announcing their plans to combine, DoorDash and Instacart said that the acquisition would help its retailer partners, both large and small, better reach customers with innovative technology.
DoorDash said it expects to retain Instacart’s brand, enterprise technology products and app. Until the transaction closes, the companies will continue to operate separately.
Founded in 2013, DoorDash initially grew its business as a restaurant delivery provider and expanded into grocery and non-food delivery in recent years.
Founded in 2012, Instacart initially focused on grocery e-commerce before expanding into providing in-store technology like digital shelf labels and smart carts. The company also built out a food as medicine initiative called Instacart Health and added restaurant and non-food retailers as delivery partners.
The deal will give DoorDash access to Instacart’s many grocery partnerships as well as its more than 600,000 delivery couriers, e-commerce capabilities and millions of users. The acquisition also serves up a sizable retail media business — Instacart’s advertising and other revenue totaled $331 million in its third quarter.
Instacart’s ad revenue accounts for roughly 30% of the company’s total revenue, based on its third-quarter results.
Over the last three years, both companies have consistently recorded year-over-year quarterly growth in orders and revenue. DoorDash’s nearly $4.6 billion in Q3 revenue was roughly four times that of Instacart’s.
DoorDash’s revenue growth has outpaced Instacart’s
Both companies have worked on tackling grocery affordability concerns for consumers. Instacart has shared that it is pushing its retailer partners to match their online prices with those in their stores. Meanwhile, DoorDash has rolled out consumer-facing tools to make it easier for shoppers to find savings or understand what their grocery bill will look like.
At Groceryshop in September, top executives at the companies said that addressing the cost concerns that have long plagued grocery e-commerce is becoming a pressing issue for the grocery industry amid ongoing consumer price sensitivity.
DoorDash said the deal would give consumers more choice and savings opportunities in delivery, while delivery couriers get more opportunities to earn money.
The aggregate transaction consideration will be at least 75% cash, according to the announcements, noting that Instacart stockholders will be able to elect cash, DoorDash stock or a combination of both, subject to proration so that DoorDash stock does not exceed 25% of the aggregate consideration. Instacart’s board of directors has unanimously approved the agreement.
Since going public in mid 2023, Instacart’s stock price has risen about 40%.
At approximately $74 billion, DoorDash’s market capitalization is roughly five times that of Instacart, which sits at roughly $14 billion, according to Yahoo! Finance.
DoorDash and Instacart both moved up the release of their third-quarter earnings results. DoorDash will host an earnings call Thursday, while Instacart cancelled its call.
Update: This story was updated to reflect Instacart's ad revenue as a share of total revenue for Q3.
