DoorDash announced on Thursday that it had agreed to acquire rival Instacart in a $17bn deal that would combine two major players in the on-demand delivery market.
The acquisition would bring together DoorDash’s strength in restaurant deliveries and Instacart’s extensive grocery delivery network.
Under the agreement, DoorDash will acquire Instacart for $65 per share, with the boards of both companies approving the deal.
“Over the last 14 years, Instacart has transformed online grocery by helping retailers of all sizes compete and grow, and joining forces with DoorDash allows us to do even more,” said Instacart CEO Chris Rogers in a press release.
“When our purpose-built grocery technology and trusted retailer and brand relationships are combined with DoorDash’s global consumer reach and logistics capabilities, we can create new opportunities for our retail and brand partners, offer an even better experience for customers and shoppers, and deliver compelling value for our shareholders.”
DoorDash plans to retain Instacart’s brand, business technology products and app following the acquisition. Both companies will continue to operate independently under their existing brands until the deal is completed.
According to DoorDash, the deal could enable more grocery retailers to develop their own online ordering platforms and advertising businesses using Instacart’s technology. Retailers could also leverage DoorDash’s fulfilment services to process more online orders and provide delivery at lower costs.
“Grocery is one of the hardest things to get right online,” DoorDash CEO Tony Xu said in the press release.
“Someone has to pick a ripe avocado, find a substitute you’d choose yourself, and get the ice cream to you before it melts. 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. Together, we could give stores of every size more of those tools and unlock the potential of grocery delivery. It’s still early innings, but we know that when more people shop local, more dollars stay local,” said Xu.
Instacart has a market capitalisation of more than $13bn, while its shares have gained 25 per cent so far this year. The company may have seen the proposed acquisition as an opportunity to secure an attractive price ahead of intensifying competition in the grocery delivery market.
