DoorDash announced Thursday that it plans to buy competing delivery company Caviar from Square in a $410 million cash-and-stock deal.
Caviar, which operates in about thirty cities throughout the United States, was originally acquired by the payments company, helmed by Twitter founder Jack Dorsey, in 2014.
DoorDash said it was interested in buying the competitor in order to acquire its "leading technology and exceptional team." Gokul Rajaram, head of the Caviar division at Square, will join DoorDash as well, the company said, adding that the deal is expected to close this year.
"We have long-admired Caviar, which has a coveted brand, an exceptional portfolio of premium restaurants and leading technology," DoorDash CEO Tony Xu said in a press release.
The acquisition further enhances the breadth of our merchant selection, enabling us to offer customers even more choice when they order through DoorDash. We look forward to welcoming the Caviar team to DoorDash and expanding our partnership with Square in the future."
Shares of Square sank as much as 8% in after-hours trading following the Caviar deal's announcement, which coincided with a quarterly earnings report that was mostly in-line with Wall Street's expectations.
DoorDash came under fire in July for a controversial tipping policy, which it eventually changed, after backlash from customers and workers. Under the old system, some customer tips were counted towards a delivery partner's guaranteed base pay. Tips are now always counted on top of a minimum base rate, Xu announced in late July.
DoorDash's acquisition is the latest in a string of delivery startup mergers in the red-hot industry. Earlier this week, Delivery.com announced it would acquired Mr. Delivery, a smaller competitor based in Austin, Texas. In July, two European delivery powerhouses, Takeaway and Just Eat, merged in a $10 billion deal. Amazon, meanwhile, has backed another European competitor, London-based Deliveroo.
"We are increasing our focus on and investment in our two large, growing ecosystems—one for businesses and one for individuals," Square CEO Jack Dorsey said in the press release. "This transaction furthers that effort, and we believe partnering with DoorDash provides valuable and strategic opportunities for Square."
Carmen Reinicke contributed to this report.
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