Deal Sets Instacart Price at $65 a Share
Key Facts
DoorDash and Instacart announced a definitive agreement on October 29 under which DoorDash will acquire Instacart for $65 a share. The price represents a 26% premium to Instacart’s closing share price on October 22, the last session before reports of the deal, according to the companies’ announcement. The agreement gives Instacart shareholders the option to receive consideration in cash, DoorDash shares or a combination of the two. It stipulates that at least 75% of the total consideration must be in cash, with shares accounting for no more than 25%. The deal moves the story from preliminary talks reported by Reuters on October 23 to an announced agreement, while remaining proposed until it is completed.
The agreement sets out the options for each Instacart share: $65 in cash, 0.3372 DoorDash shares, or $48.75 in cash plus 0.0843 DoorDash shares. Elections are subject to a proration mechanism that ensures DoorDash shares do not exceed the cap set in the agreement. Instacart’s board unanimously approved the deal, according to the companies’ announcement. Shareholders holding about 19% of the outstanding shares also pledged to vote in its favor. DoorDash plans to fund the cash portion with available liquidity and proceeds from debt financing, and has secured a 364-day unsecured bridge loan commitment. It said the agreement does not make financing a condition to closing.
The deal announcement coincided with Instacart’s release of third-quarter results, with gross transaction value on its platform rising to $10.528 billion, up 15% year over year. Orders totaled 91.4 million, an increase of 10% from the same period a year earlier. Total revenue rose 17% to $1.095 billion, comprising $764 million from transactions and $331 million from advertising and other revenue. Transaction revenue increased 14%, while advertising and other revenue grew 23%. GAAP net income was $147 million, up 2%, while adjusted EBITDA rose 23% to $342 million.
Instacart’s chief executive described the third quarter as “the best quarter in the company’s history as a public company,” citing year-over-year growth of 15% in gross transaction value and 23% in advertising and other revenue. The company works with more than 2,200 retail banners representing nearly 100,000 stores, according to its announcement. DoorDash said the proposed combination would link its delivery network with Instacart’s grocery-order fulfillment technology, retailer relationships and advertising business. The companies aim to offer delivery, technology and advertising services to grocery stores and others through their apps and retailers’ websites, Reuters reported. Until the deal closes, the companies will continue to operate independently.
A Reuters report on October 23 said Instacart was exploring a sale and holding preliminary talks with DoorDash and Uber, with no guarantee a deal would be completed; it estimated a potential value of between $16 billion and $17 billion based on a hypothetical premium of between 30% and 40%. Instacart shares rose about 9% that day, while its market capitalization stood at about $12 billion at the October 22 close, according to the report. In earlier talks in 2021, DoorDash explored buying Instacart, legally known as Maplebear, at a potential valuation of between $40 billion and $50 billion, but regulatory approval concerns derailed those discussions, Reuters reported. After announcing the current agreement, Instacart canceled its third-quarter earnings call, scheduled for November 5, suspended its financial guidance and withdrew its long-term guidance during the deal period. DoorDash had announced that it was moving up its third-quarter results to before the market opened on October 29, with a call at 5:30 a.m. Pacific time, from its previous date of November 4.