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)