DoorDash announced Thursday it will buy rival Instacart for $17 billion in a deal that the company says will help local businesses compete with delivery giants such as Amazon and Walmart.

One of the most popular app-based delivery services in the U.S., DoorDash delivers hot meals from restaurants as well as groceries and other items from stores like CVS and Target. The company is paying $65 per share in cash and stock to acquire Instacart, which represents a 26% premium to Instacart's closing stock prior to the first media reports of the planned acquisition.

Instacart occupies a narrower niche than its soon-to-be owner — it offers grocery delivery from supermarkets and some retailers but does not deliver prepared meals. It went public in 2023 after experiencing a surge in demand related to the COVID-19 pandemic.

The combination of the two San Francisco-based rivals has already raised antitrust concerns, but it could also help combat the dominance of major e-commerce companies.

"The tie up between these two companies could create a little more monopolistic power," said Scott Hanson, a financial advisor and co-foonder of Allworth Financial. "But on the other hand, maybe it gives them an opportunity to compete more head-on with with Amazon."

The deal could also help DoorDash build on its expansion into grocery delivery, analysts said, and give the company a financial boost after seeing its shares fall 20% so far this year. DoorDash shares were up 3% on Thursday following its announcement, reaching $177.62 per share with a market value of $75 billion.

Instacart shares have risen 30% this year and fell nearly 2% in midday trading Thursday to above $57 per share. Its market value sat around $13 billion.

"Grocery is one of the hardest things to get right online," said DoorDash co-founder and chief executive Tony Xu in a statement. "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."

DoorDash said the merging of the two companies will give customers more options at lower prices and offer more freedom and earning opportunities to the independent contractors who make the deliveries.

The deal could also help level the playing field in a delivery marketplace that is increasingly dominated by powerhouses that have their own in-house delivery platforms.

DoorDash and Instacart could provide their services to smaller local businesses who don't have the capacity to develop their own delivery tech, the companies said.

"This really is about giving every retailer of every size the ability to compete," Xu said on a conference call Thursday. "I think we'll actually be able to re-accelerate the Instacart marketplace, and I actually think that they'll help us grow a lot of the first party software products for grocers and retailers."

The acquisition is expected to close at the end of 2027 or the beginning of 2028, DoorDash said. DoorDash plans to keep Instacart's brand and app intact. Until the deal closes, the two companies will continue to operate independently.

Once merged, customers can subscribe to both DoorDash and Instacart through a single account, which DoorDash estimated will save customers $100 million per year on membership fees. The merger will give Instacart customers access to 50,000 additional stores, on top of the roughly 100,000 stores already on the platform.

DoorDash said they will not mandate exclusivity from grocers and retailers, allowing businesses to partner with any platform they choose.

"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 Chief Executive Chris Rogers in a statement.

DoorDash also announced its third quarter earnings on Thursday, reporting total orders increased 28% year over year and gross order value increased 36% year over year to $33.9 billion.

The merger could pose a challenge for other app-based delivery services like Uber Eats, Grubhub and Postmates. Uber was previously in talks to acquire Instacart but a deal was never signed.

"You've got two pretty well-known brands merging together, it gives them more power in the marketplace," Hanson said. "A competitor is probably going to have to come up with something a little unique in order to win those customers."

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