DoorDash is buying grocery delivery company Instacart in a deal worth about $17 billion, according to Yahoo Finance. The company best known for restaurant delivery will pay $65 per Instacart share, a 26% premium over Instacart's October 22nd closing price. About 75% of the deal is in cash, and Instacart shareholders can choose cash, DoorDash stock or a mix of both. Instacart's board approved the deal unanimously. DoorDash shares jumped in premarket trading Thursday, while Instacart's dipped slightly.

DoorDash CEO Tony Xu called grocery "one of the hardest things to get right online." He said Instacart has spent years mastering it for grocers, while DoorDash brings the delivery network and technology local stores already use. The deal is a direct challenge to the two biggest players in online grocery. Walmart holds about 30.9% of the market and Amazon about 23.6%, according to Wedbush. Wedbush analyst Ygal Arounian said that pairing strong restaurant delivery with Instacart's grocery marketplace could give the combined company an edge against those two giants, especially in same-day and one-hour delivery.

For shoppers, DoorDash says the merger means more options rather than higher prices. Customers would get two memberships for the price of one. Instacart users would gain access to more than 50,000 additional stores, on top of the nearly 100,000 already on the platform. The company also says local businesses would get more ways to make money through the combined service.