DoorDash (DASH) announced plans to acquire hyperlocal grocery delivery provider Instacart (CART) on Thursday morning in a deal valued at $17 billion.

DoorDash, which is primarily known for its restaurant food delivery business, will pay $65 per Instacart share, a 26% premium over the stock's Oct. 22 closing price. The transaction includes 75% cash, with Instacart stockholders able to elect cash, DoorDash stock, or a combination of both. Instacart's board of directors unanimously approved the deal, according to a press release.

"Grocery is one of the hardest things to get right online," DoorDash CEO Tony Xu said in the release. "Instacart has spent years learning to do that well for grocers, while DoorDash has built a delivery network and technology that local stores rely on every day. Together, we could give stores of every size more of those tools and unlock the potential of grocery delivery."

DoorDash stock popped over 5%, while Instacart stock fell 1.5%.

The acquisition comes as Walmart (WMT) and Amazon (AMZN) have been taking share of the grocery delivery market, especially for same-day and one-hour delivery.

Prior to the announcement, Wedbush analyst Ygal Arounian said the combination of Instacart and DoorDash could "potentially prove to be a competitive differentiation."

"A combination of strong restaurant delivery plus a marketplace including various grocers from Instacart can be a critical combination against Walmart and Amazon in particular, who continue to push in this market as well," Arounian said.

Walmart currently holds a roughly 30.9% share of the online grocery market, ahead of Amazon at roughly 23.6%, per Wedbush.

For customers worried about what the Instacart acquisition means for prices, the company said shoppers will now get two memberships for the price of one and more choices.

"Instacart customers could shop at more than 50,000 additional stores, on top of the nearly 100,000 stores on the Instacart platform today," the release said.

For local business owners, the company said this would allow them more ways to earn.

A DoorDash delivery courier in Miami Beach, Fla. (Jeffrey Greenberg/Universal Images Group via Getty Images) · Jeff Greenberg via Getty Images

Follow Brooke DiPalma on X at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.