The $17 billion deal is at least 75% cash, and DoorDash owes Instacart $1.25 billion if antitrust approval fails. Instacart shares traded below the deal price after the announcement, leaving a spread of about 13% to the cash price.
DoorDash agreed on Thursday to buy Instacart for $65 a share. Instacart's stock went down.
The companies said the deal values Instacart at approximately $17 billion of equity. Each Instacart holder can choose $65 in cash, 0.3372 DoorDash Class A shares, or $48.75 in cash plus 0.0843 shares, with stock capped at 25% of the total. The price is a 26% premium to Instacart's close on Oct. 22, the last trading day before reports of talks, and about 11% above Wednesday's close of $58.42.
Instacart was about $57.50 in early afternoon, down about 1.6% and roughly 13% below the cash price. Before the announcement it had traded as high as about $62.70 in thin premarket trading. Instacart also reported third-quarter results, suspended its financial guidance and canceled its Nov. 5 earnings call on Thursday morning, according to a summary of its regulatory filing, so the deal terms were not the only news in the stock.
What the contract says about time
The agreement is built for a long review. Its outside date is 12 months after signing, but it extends automatically up to four times, by three months each, if only antitrust approvals remain. That allows up to two years. The companies expect to close "in the end of 2027 or the first half of 2028." Closing requires U.S. antitrust clearance under the Hart-Scott-Rodino Act, Canadian and Israeli competition approvals, and an Instacart shareholder vote. Holders of about 19% of Instacart's voting power have signed voting agreements.
The contract also decides who pays if it fails. If the deal collapses on antitrust grounds, DoorDash pays Instacart $1.25 billion. If Instacart walks away for a better offer, it pays DoorDash $650 million. DoorDash has a $13 billion bridge loan commitment from JPMorgan and says the deal is not subject to financing.
What the spread prices
A 13% spread on a signed, board-approved, mostly cash deal is wide. Annualized to the end of 2027, it works out to roughly 11% a year, and to roughly 8% a year if closing slips to mid-2028, by our arithmetic. It likely reflects the time to closing and the chance that regulators challenge the combination.
The stock alternative adds less than it appears to. At DoorDash's early-afternoon price of about $178.84, 0.3372 DoorDash shares are worth about $60.30, below the $65 cash option. The stock election only matches the cash if DoorDash trades above about $192.76, by our arithmetic.
DoorDash shares rose about 5.5%, but the company also reported third-quarter results within minutes of the deal announcement, so the move cannot be read as a verdict on the acquisition. On Oct. 23 and Oct. 26, the days talks were reported, DoorDash fell 3.5% and 6.1%.
The antitrust question
"The main risk is regulatory approval," analysts at CFRA Research said. "The current regulatory backdrop is generally favorable, but the long closing window leaves the deal exposed to changes in policy." Zak Stambor of Emarketer said: "There is meaningful overlap between the companies, especially in grocery delivery, so a deal would almost certainly draw antitrust scrutiny."
DoorDash has tried to get ahead of that. It committed to keeping Instacart as an "Open Platform, No Grocery Exclusivity" and to retaining the Instacart brand and app. It also says the deal offers "a multi-year path to $500 million or more of annual synergies, net of investments," but expects to reinvest more than all of the savings in the first year.
On Wednesday, separately, the Federal Trade Commission opened a study of pricing practices that names both companies. That study is not a merger review.
Bargain or fair price for risk?
The case that the spread is too wide: terms are signed, a fifth of the vote is committed, financing is in place, and DoorDash bears the cost of an antitrust failure.
The case that it is fair: the contract itself anticipates up to two years of review, policy can change in that window, and if the deal fails Instacart could drift back toward its pre-report price of $51.68.
The next tests
The Hart-Scott-Rodino filing and whether the FTC issues a second request, the proxy filing with its account of the sale process, DoorDash's permanent financing, and Instacart's trading against $65.