DoorDash's $17 billion Instacart deal gives shoppers one pitch and investors another

DoorDash's planned $17 billion acquisition of Instacart is being sold as continuity to gig shoppers and as a step toward a different grocery fulfillment model to investors. To Instacart's gig shoppers, the merger announcement promises continuity: they keep the flexibility to choose how much they work, the information they need to decide which batches to accept, and the right to "choose whether to take on DoorDash orders or keep shopping only on Instacart." To investors, DoorDash's third-quarter shareholder letter, released the same morning, describes store-based picking as a stage rather than a destination.

"Our initial aims in online grocery with third-party fulfillment won't be the end state," the letter says.

The destination it describes is DashMart, the warehouse project DoorDash started five years ago and now uses to manage thousands of products for grocers including Giant Eagle and Albertsons. When DoorDash holds the inventory itself, the company says, it reaches fulfillment accuracy above 99% and delivers more than 10 minutes faster on average, because the warehouse is optimized for delivery "whereas a grocery store was never set up for delivery." The letter calls warehouse inventory management "a fixed cost business" and says Instacart's scale "will help amortize the fixed cost of managing inventory on behalf of grocers." DoorDash says the efficiencies the deal creates could fund further investment in that fulfillment network.

DoorDash says it expects to keep Instacart's brand, app and enterprise technology products. Still, the letter is explicit that Instacart's volume is part of the case for building the warehouse model.

The terms are firm. DoorDash would pay $65 a share, a 26% premium to Instacart's closing price on October 22, the last trading day before media reports of a possible deal, with at least 75% of the consideration in cash, according to the companies' announcement. The merger agreement filed with the Securities and Exchange Commission shows JPMorgan committed up to $13 billion in bridge financing. DoorDash told investors it sees a multi-year path to $500 million or more in annual synergies, net of investments, but expects to reinvest more than 100% of synergies in the first year after closing, with positive net synergies from year two.

For the near-term labor case, DoorDash points to density. DoorDash says that from the first day after closing, combined reach would increase density across the grocery store network, speeding delivery, lowering fulfillment costs and providing "greater earning opportunities for Shoppers." The announcement imagines a single workforce moving between categories: grocery orders on a quiet day, restaurant orders at peak times, or both. The two networks are far from equal in size. DoorDash handled 993 million orders in the third quarter, up 28% from a year earlier, according to its results; Instacart handled 91.4 million, up 10%, its own results show. DoorDash says its U.S. grocery and retail business is growing at more than double the pace of its U.S. restaurant business.

All of it waits on regulators. The companies expect to close at the end of 2027 or in the first half of 2028, subject to Instacart shareholder approval, U.S. antitrust clearance under the Hart-Scott-Rodino Act and approvals in Canada and Israel. Rosenblatt Securities analyst Scott Devitt told MarketWatch the timeline suggests a "long regulatory path." The merger agreement anticipates one: its outside date is 12 months after signing, with up to four automatic three-month extensions if antitrust conditions are the only ones unmet. DoorDash would owe Instacart a $1.25 billion termination fee for specified antitrust-related failures; Instacart would owe DoorDash $650 million in other circumstances, including taking a superior offer. Instacart has cancelled its November 5 earnings call, suspended financial guidance and withdrawn its long-term targets.

The Federal Trade Commission is likely to scrutinize the deal, Reuters reported, and the agency's interest already reaches into pay. On Wednesday, the day before the announcement, the FTC launched a study of whether and how companies including DoorDash and Instacart use individual shoppers' data to set prices and wages for drivers, according to Reuters. Last year DoorDash accounted for 65.1% of orders across restaurant, grocery and retail delivery among standalone apps, with Uber Eats at 25.8% and Instacart at 9.1%, according to YipitData figures provided to Reuters. DoorDash could argue that it also competes with Walmart, Amazon, Target and Gopuff, which deliver groceries from their own stores and warehouses, Reuters noted.

Local labor enforcers are watching as well. New York City's commission on consumer and worker protections, which reached a $131.5 million settlement with DoorDash last month over allegations of underpaying workers, called the deal part of "a troubling trend of mega-corporations consolidating," according to the BBC. "Whether or not this merger proceeds, we will fully enforce delivery workers' rights," it said.