DoorDash's $17 billion Instacart deal is priced for a long antitrust fight

DoorDash has agreed to buy Instacart, the grocery delivery company formally named Maplebear, for $65 a share, or about $17 billion in equity value. The merger agreement was signed on October 28 and announced the next day alongside DoorDash’s third-quarter results, according to the company’s release. The price is a 26% premium to Instacart’s close on October 22, the last trading day before media reports of talks. At least 75% of the payment is cash, and the companies expect to close at the end of 2027 or in the first half of 2028.

That closing date is the most telling number in the announcement. A deal that needs more than a year to close is a deal both sides expect regulators to examine closely.

The contract assumes a slow review

The merger agreement filing sets an outside date of October 28, 2027. If antitrust clearance is the only thing still missing by then, the deadline extends automatically, up to four times, by three months each. Read together, those clauses give the review room to run for up to two years from signing.

The break fees point the same way. If the deal dies because antitrust conditions are not met by the deadline, or because a court blocks it under antitrust law, DoorDash pays Instacart $1.25 billion in cash. If Instacart walks away for a better offer, it owes DoorDash $650 million. The larger fee sits on the regulatory side, which shows where the two companies think the deal is most likely to fail.

DoorDash is also taking on financing risk up front. JPMorgan has committed a $13 billion, 364-day bridge loan, and the deal has no financing condition. DoorDash says it plans to replace the bridge with cash on hand and longer-term debt while keeping investment-grade ratings. In return it promises a multi-year path to at least $500 million a year in synergies, net of investment, though it expects to reinvest more than all of them in the first year after closing.

Why regulators will look hard

The overlap is large. Citing figures from the research firm Consumer Edge, the Associated Press reported that DoorDash’s share of U.S. delivery platform spending has grown from 44% to 59% over five years, while Instacart’s fell from 26% to 18%. Uber Eats held steady at just under 20%. On those estimates, the combined company would account for roughly three-quarters of that spending.

The trend behind those figures also explains why Instacart sold. It was losing ground as DoorDash added grocers: DoorDash now lists all 2,700 Kroger stores in the U.S. and added Costco delivery in September, according to the AP. Selling at a premium now locks in a price before the gap widens further.

Opposition came quickly. The American Economic Liberties Project and the UFCW union want regulators to block the deal, Grocery Dive reported. The Liberties Project also pointed to the Federal Trade Commission’s recent order requiring nine companies, DoorDash and Instacart among them, to explain how they use personal data to set prices and pay. A merger that pools both companies’ shopper data will draw questions on that front, not only on market share.

DoorDash’s pitch: the real rivals are Walmart and Amazon

DoorDash’s answer is to define the market more broadly. The companies launched a campaign called Shop Local Together and frame the merger as a way to help independent and regional stores compete with “the world’s biggest e-commerce giants,” Axios reported. They say they will cancel exclusivity agreements so grocers can use any delivery platform, and that merging the two subscription fees will save consumers $100 million a year.

Those commitments look aimed at an FTC review. If the relevant market is all grocery e-commerce, with Walmart and Amazon in it, a combined DoorDash and Instacart looks less dominant than it does in the delivery-app spending figures above. Axios judged that the deal has “a solid chance” of clearing federal review under the Trump administration, while noting that state and local officials, especially in Democratic-run states, are likely to push back. New York City mayor Zohran Mamdani has already attacked the consolidation, saying it means “higher prices, harsher exploitation” for New Yorkers.

Grocery Dive noted that the FTC appears more open to large mergers now, but that the 2023 merger guidelines drafted under the Biden administration remain in effect. Neil Saunders of GlobalData, quoted by Grocery Dive, put the risk for grocers this way:

“DoorDash will need to ensure that it is seen as a partner that enables retailers to succeed”

He warned that the alternative is a company grocers see as an intermediary that “extracts value from the business.”

What changes, and what to watch

For shoppers, little changes for now. DoorDash says Instacart’s brand and app will stay, and the deal is not expected to close before late 2027. For grocers, the question is bargaining power. A retailer that today plays the two platforms against each other on fees would be left with one owner and Uber as the main alternative, which is why the exclusivity pledge matters and why grocers’ views will carry weight with regulators.

Walmart is the open case. Instacart delivers from Walmart, while DoorDash stopped Walmart delivery in 2022, and the AP reported that it is unclear how the deal will affect that arrangement.

Several things are not yet known: whether the FTC will open an extended investigation, whether state attorneys general will sue separately, and what concessions DoorDash would accept to win approval. The 8-K summary does not say what remedies DoorDash would have to accept. The next markers are the Instacart shareholder vote, where holders of about 19% of shares have already agreed to vote yes, and the first signals from Washington and Ottawa on how deep the review will go.