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DoorDash to acquire Instacart in $17 billion deal to expand grocery delivery business
DoorDash plans to acquire Instacart in a $17 billion deal to expand grocery delivery, reach more local stores and compete with Walmart and Amazon in the US.
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DoorDash announced plans to acquire Instacart in a deal valued at $17 billion on Thursday morning. Instacart is a grocery delivery company that helps customers order groceries from local stores.
DoorDash is mainly known for delivering restaurant food. The acquisition will help the company expand its grocery delivery business and bring more local stores onto its platform, according to the companies' announcement.
DoorDash to pay $65 per Instacart share
DoorDash will pay $65 per Instacart share under the deal. This is 26% more than Instacart's closing share price on October 22, according to Yahoo Finance. The deal will include 75% cash. Instacart shareholders will be able to choose cash, DoorDash shares, or a combination of both, according to the company's press release.
Instacart's board of directors has unanimously approved the deal. This means all the board members supported the proposed acquisition, according to the press release.
DoorDash CEO Tony Xu said grocery delivery is one of the most difficult parts of online shopping to manage successfully. He said Instacart had spent years learning how to serve grocery stores, while DoorDash had built a delivery network and technology used by local businesses.
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Xu said the two companies could work together to give stores of all sizes better tools for online delivery. He also said the deal could help unlock more opportunities in the grocery delivery market, according to the press release.
DoorDash shares rise after $17 billion deal
DoorDash shares rose more than 5% in premarket trading after the announcement. Instacart shares moved slightly lower during the same period, according to Yahoo Finance.
The acquisition comes as Walmart and Amazon continue to gain a larger share of the online grocery delivery market. Both companies are competing to offer faster deliveries, including same-day and one-hour services, according to Yahoo Finance.
DoorDash and Instacart to compete with Walmart, Amazon
Before the announcement, Wedbush analyst Ygal Arounian said combining DoorDash's restaurant delivery business with Instacart's grocery marketplace could give the companies a competitive advantage.
Arounian said the combination of strong restaurant delivery services and access to different grocery stores could help DoorDash and Instacart compete more effectively against Walmart and Amazon, according to Yahoo Finance.
Walmart currently holds about 30.9% of the US online grocery market, while Amazon has around 23.6%, according to figures cited by Wedbush.
Instacart customers to get access to more stores
The acquisition could also give Instacart customers access to more stores. The company said customers could shop at more than 50,000 additional stores through the combined business.
Instacart already has nearly 100,000 stores on its platform. Adding more stores through the DoorDash deal would expand the choices available to customers, according to the companies' press release.
The companies also said customers could get two memberships for the price of one. This could give shoppers access to more benefits and choices, although the announcement did not provide further details about how the membership arrangement would work.
The deal could also create more earning opportunities for local business owners. The companies said the combined business would give local stores more ways to reach customers and earn money through delivery services, according to the press release.
