DoorDash strikes $17 billion deal for US rival Instacart in bets on grocery delivery

Oct 29 (Reuters) - DoorDash said on Thursday it would buy Instacart in a deal valued at about $17 billion, stepping up its push into the ‌fast-growing US grocery delivery market as competition among app-based platforms intensifies.

Heightened competition ‌following a slowdown in orders from pandemic-era peaks, along with rising costs and tougher regulatory scrutiny over ​the treatment of gig workers, has spurred a wave of dealmaking across the industry.

Meanwhile, delivery companies chasing growth are expanding into grocery, convenience and other retail categories as their core food-delivery businesses mature.

"Grocery is one of the hardest things to get right online," ‌said Tony Xu, co-founder and ⁠CEO of DoorDash, adding Instacart has spent years learning to do that well for grocers.

Online grocery delivery has also gained traction as ⁠consumers increasingly prize convenience, while a recent surge in gasoline prices linked to disruptions from the war in Iran could give shoppers another reason to avoid trips to stores.

DoorDash ​has offered ​Instacart shareholders $65 per share held, representing a ​premium of about 26% to the ‌stock's closing price on October 22 before reports of deal talks first emerged.

The consideration will be at least 75% cash, with Instacart shareholders able to elect cash, DoorDash stock or a combination of the two, the companies said.

Shares of Instacart, formally known as Maplebear, were flat at $58.50 in premarket trading. They had hit a record high ‌of $62 on Monday.

DoorDash shares jumped nearly 7% ​after the company also reported better-than-expected quarterly revenue. They ​have declined about 25% so ​far this year through their last close.

The transaction is expected to ‌close at the end of 2027 or ​the first half ​of 2028.

The deal could face scrutiny over its impact on competition, with New York City's Department of Consumer and Worker Protection (DCWP) saying on Wednesday that a ​potential merger continued a "troubling ‌trend" of corporate consolidation.

DoorDash, however, pledged on Thursday that local grocers could ​continue to work with any delivery platform they choose.

(Reporting by Anuja Bharat ​Mistry in Bengaluru; Editing by Sriraj Kalluvila)