Instacart’s advisers had been talking to Uber. By Monday they were talking to DoorDash, and the price had moved.
DoorDash is in advanced negotiations to buy Instacart for about $17 billion, according to people familiar with the matter, with an agreement possible as soon as Wednesday. The people cautioned that no deal has been signed and that the talks could still fall apart. The Wall Street Journal first reported the discussions.
Instacart was worth about $13 billion at Friday’s close. A $17 billion price is a premium of roughly 30 percent, which for a company whose shares have not traded above their 2023 offering price in two years is an unusually full number.
The market’s reaction split along the obvious line. Instacart’s shares rose about 8 percent on the report, still below where they began, while DoorDash fell about 6 percent, a decline that values the acquisition at more than the arithmetic suggests. DoorDash shareholders were being asked to pay for growth in a business their company already runs.
Talks with Uber are no longer advancing, according to the same people. Uber had examined Instacart earlier in the year as a way to combine two delivery networks, and walked away from the price. Its withdrawal left DoorDash as the remaining bidder, which is generally the moment a premium gets larger rather than smaller.
What DoorDash would be buying is the grocery side of the delivery business, which is the part that has resisted consolidation. Instacart does not employ shoppers. It sells software to supermarkets, lists their inventory, dispatches contract shoppers and takes a commission, a model with no stores, no inventory and no kitchens.
That model has one large advantage: advertising. Instacart’s sponsored listings, where a brand pays to appear at the top of a search for cereal, carry margins that delivery fees never approach, and the company has built a business of several hundred million dollars a year on them. It reported its first quarterly profit in 2023, largely on that revenue.
DoorDash has spent four years trying to assemble the same thing. It bought Wolt in Finland for about $8 billion in 2022, opened its own DashMart warehouses, and signed grocery partners one chain at a time. Buying Instacart would replace that chain-by-chain work with a single contract covering thousands of stores.
The threat both companies face is Amazon. The retailer owns Whole Foods, runs its own delivery service on groceries, and can sell advertising against a shopper’s basket at a scale no third-party platform can match. Instacart’s response has been to add tools for retailers, including fulfillment software and shelf-level data, in the hope of being too embedded to replace. A larger owner would give that effort more capital and more stores.
The combined company would control the large majority of third-party grocery delivery in the United States. DoorDash leads restaurant delivery with roughly two-thirds of the market, Uber Eats holds most of the rest, and Instacart leads grocery with a share above half in most cities.
That arithmetic is exactly what antitrust reviewers look at. A $17 billion transaction would face a second request from the Federal Trade Commission, and the agency has spent the past several years building a record of challenging horizontal deals in technology and services. State attorneys general have also taken an interest in delivery markets, where labor practices and fee structures are regulated separately.
The labor question runs underneath the corporate one. Both companies rely on contract workers, both have been sued over classification in California and Massachusetts, and both have spent heavily on ballot campaigns. A merger would concentrate those legal exposures in one defendant, which is a benefit to neither side of the argument.
Instacart’s shareholders have reasons to accept. The company went public in September 2023 at $30 a share, down from a private valuation of $39 billion in 2021, and the stock has spent most of the period since below its offering price. Venture funds that have held the shares for a decade would take a 30 percent premium to a two-year high.
DoorDash’s have reasons to hesitate. Grocery delivery is a lower-margin business than restaurant delivery, because the baskets are heavier and the orders less frequent, and the company has told investors it expects its grocery category to reach profitability on an adjusted basis before the end of next year. Acquiring a competitor’s network could delay that.
Analysts said the strategic logic is about density. Two delivery networks in the same city duplicate the same drivers, the same routes and the same support staff, and merging them lowers the cost per order at every volume level. That is the argument DoorDash would make to its board, and the one it would make to regulators.
The regulatory argument is harder. Cost savings from consolidation are precisely the efficiencies that merger review treats with skepticism, on the theory that a market with fewer competitors produces those savings by raising prices rather than by removing waste.
A deal signed this week would still face months of review before it closed, and the parties would be free to abandon it if the government sued. That is the shape of large transactions in this sector now: announced with confidence, closed a year later or not at all.
