DoorDash has agreed to buy Instacart in a $17bn deal that would combine the largest US restaurant delivery network with the company that turned grocery shopping into an app. The two firms announced the agreement on Thursday, with DoorDash paying $65 a share in a transaction valued at about $17bn, or £12.8bn.

The price is a 26% premium to Instacart's closing share price on October 22, before news of a possible merger emerged, according to the BBC. DoorDash said the deal will be at least 75% cash and is expected to close by the end of 2027 or in the first half of 2028. It is DoorDash's biggest acquisition to date.

The companies framed the deal as an expansion of choice. Instacart shoppers will be able to buy from 150,000 stores, up from the current 100,000, while DoorDash will push beyond restaurants into retail, the firms said. In the other direction, Instacart customers will gain access to 50,000 additional stores covered by DoorDash, according to the Guardian.

"Together, we can accelerate innovation across the grocery industry and make online grocery more seamless and affordable for the millions of households we serve," Instacart chief executive Chris Rogers said. He added that Instacart has spent 14 years helping retailers of all sizes compete and grow, and that joining DoorDash would let it do more.

DoorDash co-founder and chief executive Tony Xu described grocery as the hard part. "Grocery is one of the hardest things to get right online. Someone has to pick a ripe avocado, find a substitute you'd choose yourself, and get the ice cream to you before it melts," he said, adding that Instacart had spent years learning to do that for grocers while DoorDash built a delivery network local stores rely on.

The two businesses are different in scale and shape. Instacart, founded in 2012, operates in the US and Canada, uses about 600,000 independent contractors as shoppers and completed 338 million orders last year, according to company filings cited by the Guardian. It has a market value of about $14bn. DoorDash, founded in San Francisco in 2013, began with restaurant delivery, expanded into pet food and electronics, operates in 40 countries and completed more than 3 billion orders last year with a network of 9 million independent delivery workers. Its market value is about $73bn.

DoorDash has been building a grocery business since 2020, when pandemic demand pushed it beyond restaurants. Grocers were initially cautious: Kroger partnered with the company in 2022 but first allowed it to deliver only flowers, sushi and prepared meals from a limited number of stores, the Guardian reports. That partnership expanded last autumn, and DoorDash now lists the full inventory of all 2,700 US Kroger stores. It added Costco delivery last month.

The strategic logic is about order frequency. Restaurant delivery is maturing, and growth now lies in more frequent, higher-value orders such as weekly grocery shops, convenience items and retail, Morningstar analyst Martin Szumski told Reuters, according to the BBC. Grocery baskets are larger and repeat more often than restaurant orders, but they are also harder to fulfil because substitutions and freshness matter.

The deal will keep Instacart's brand, app and technology products, and the two services will operate as independent companies until the transaction closes. Instacart shoppers will continue fulfilling Instacart orders, and grocers can choose to work with either company, the Guardian reports.

Regulators are the obvious risk. Reuters reported that the merger may raise antitrust issues, and the companies will need approval in the US and elsewhere. New York City's commission on consumer and worker protections, which reached a $131.5m settlement with DoorDash last month over allegations of underpaying workers, said the deal "continues a troubling trend of mega-corporations consolidating" and that it would keep enforcing delivery workers' rights whether or not the merger proceeds.

The competitive backdrop is Amazon, which has its own grocery ambitions and logistics network. DoorDash's move is the largest consolidation step yet in a delivery market that has spent a decade fighting over restaurant meals and is now fighting over the weekly shop. Related coverage on this site includes Morgan Stanley's raised price target for Amazon, the big-tech earnings round-up and the Fed's survey of household finances.

The market reaction will take time to read: Instacart's $14bn market value is below the $17bn price, while DoorDash's $73bn value means the acquisition is large but not transformational for its balance sheet. The companies said the transaction is subject to regulatory approval in the US and elsewhere.The limits are straightforward. Neither company has published the full merger agreement, the financing terms beyond the cash share, or a closing timetable firmer than "end of 2027 or first half of 2028". The antitrust analysis is speculative until regulators review the deal, and the worker classification questions that surround both companies' contractor models are unresolved. What is established is the price, the premium, the store counts and the two chief executives' stated rationale.