Canada’s Competition Bureau says it’s reviewing a recently announced merger deal that would see DoorDash acquire rival Instacart for US$17 billion as the app-based grocery delivery market intensifies in both Canada and the U.S.
The transaction is expected to close at the end of 2027 or the first half of 2028.
“The Bureau will be reviewing the proposed merger between DoorDash and Instacart,” said the Competition Bureau in a statement sent to Global News Thursday.
“The Bureau’s mandate is to review mergers to determine whether they harm competition. Under the Competition Act, we may review any merger or acquisition to protect and promote competition in Canada.”
The Competition Bureau has also been cracking down on attempts by large grocery and food companies to limit competition in Canada, which it says can make food and other essentials less affordable for consumers.
“Competitive markets empower consumers and drive businesses to lower prices, improve product quality, innovate, and bring valuable new products to market,” the Competition Bureau said in its 2023 Retail Grocery Market report.
Earlier this month, a proposed merger was cancelled after being probed by the Competition Bureau that would have otherwise seen a consolidation of two frozen and canned vegetable companies become one.
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Grocery delivery typically comes at an additional cost to consumers, and a consolidation of grocery delivery companies could, in theory, also mean less choice for shoppers.
This is why the Competition Bureau says it may step in if it finds a merger, like that of DoorDash acquiring Instacart, were to harm competition.
“When a Bureau merger investigation determines that a transaction is likely to result in a substantial lessening or prevention of competition, we take appropriate action,” said the Competition Bureau in the statement.
According to the Competition Bureau’s website, if it finds there is a competition concern related to a transaction, like a merger deal, then it can negotiate with the parties directly to resolve those concerns. In other cases, the Competition Bureau may apply to the Competition Tribunal, which can apply legal leverage and potentially challenge the merger.
Heightened competition following a slowdown in consumer 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.
In the U.S., New York City’s Department of Consumer and Worker Protection (DCWP) said on Wednesday that a potential merger continued a “troubling trend” of corporate consolidation.
The deal announcement comes as both companies reported quarterly earnings Thursday, when DoorDash also pledged that local grocers could continue to work with any delivery platform they choose.
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.
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.
DoorDash saw revenue of $4.6 billion in the third quarter, up 34 per cent from a year earlier. Meanwhile, Instacart saw revenue of $1.1 billion, up 17 per cent year-over-year.
DoorDash has offered Instacart shareholders $65 per share held, representing a premium of about 26 per cent to the stock’s closing price on Oct. 22 before reports of deal talks first emerged.
The consideration will be at least 75 per cent 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 seven per cent after the company also reported better-than-expected quarterly revenue. They have declined about 25 per cent so far this year through their last close.
– with files from Reuters
Never heard of it but its worth billions?
Zzzzzzzzzzzz
Freedumb
Back to basement
I’ve read they can’t afford to pay their drivers a living wage, but they have $17B to buy an app?
Get off your azz’s and get your own groceries ya lazy Canadians !
SnoreDullard stinks! And Instacart has never been much better. They are incredibly expenses services at a time when grocery prices are very high. This is the news I needed to skip the apps and just take a walk to get my groceries.
Agrees to buy? Oh, if I have to, I guess I’ll buy Instacart…