SAN FRANCISCO, California: DoorDash has agreed to buy U.S. grocery delivery rival Instacart for about $17 billion in its biggest acquisition yet, giving the company greater scale as it expands beyond restaurant delivery into groceries and other retail categories.

The deal will help DoorDash compete with retailers including Walmart and Amazon, which have built extensive store, warehouse and delivery networks.

"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.

Instacart founder Apoorva Mehta said the two companies had explored a combination on and off for years.

The companies began talks about a potential deal over the summer, and in early September, Instacart's CEO signaled to DoorDash's CEO that the company was exploring strategic alternatives, according to a source familiar with the matter.

Instacart also held preliminary deal talks with Uber, but the ride-hailing company ultimately did not pursue a transaction, in part because it had announced a $14.8 billion acquisition of German food delivery platform Delivery Hero just a few months earlier, the source said.

DoorDash and Instacart did not immediately respond to a request for details on when the deal talks began.

"Restaurant delivery is maturing, and growth now lies in more frequent, higher-value orders: weekly grocery shops, convenience items, and retail," said Martin Szumski, analyst at Morningstar.

Consolidation has gathered pace globally as companies contend with slowing orders, rising costs and tighter regulatory scrutiny over the treatment of gig workers.

Online grocery delivery has gained traction as consumers increasingly prioritize convenience. Spiking gasoline prices during the war in Iran could give shoppers another reason to avoid trips to stores.

AI-native companies have also been disrupting how consumers shop online, with more shoppers making purchases through agentic AI platforms such as Meta's Muse and personal assistant app Instinct.

Under the deal, DoorDash has offered Instacart shareholders $65 per share, 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 choose cash, DoorDash stock or a combination of the two, the companies said.

Shares of Instacart, formally known as Maplebear, were flat at $58.35 in early trading after hitting a record high of $62 on Monday.

DoorDash shares rose nearly 6% after the company also reported better-than-expected quarterly revenue. The shares had fallen about 25% so far this year through their last close.The transaction is expected to close at the end of 2027 or in the first half of 2028.

"The main risk is regulatory approval," analysts at CFRA Research said in a note, adding that the long timeline for the closing of the transaction suggests both sides expect an extended antitrust review.

"The current regulatory backdrop is generally favorable, but the long closing window leaves the deal exposed to changes in policy," they added.

New York City's Department of Consumer and Worker Protection said Wednesday that a potential merger continued a "troubling trend" of corporate consolidation.

DoorDash plans to retain Instacart's brand and app after the transaction closes and combine the companies' membership programs. It also pledged not to require grocers to use its delivery services exclusively.

Instacart would have to pay DoorDash a termination fee of $650 million, while DoorDash would pay $1.25 billion if the deal is terminated under certain circumstances, according to a regulatory filing.