Key Takeaways
- • Ares Capital (NASDAQ: ARCC) agreed to acquire MidCap Financial Investment Corporation (NASDAQ: MFIC) in a stock-and-cash merger with a total enterprise value of approximately $2.6 billion, per a Business Wire release.
- • MFIC stockholders will receive $10.88 per fully diluted share: about $1.21 in cash from a subsidiary of Ares Management and about $9.67 in Ares Capital common stock, adjusted for MFIC's pre-closing special dividend.
- • The consideration represents a 30.1% premium to MFIC's October 26, 2026 closing price and a 25.8% premium to its 30-day VWAP; MFIC's preliminary September 30, 2026 NAV per share is approximately $12.86.
- • Upon closing, expected in the first half of 2027, Ares Capital's pro forma portfolio would exceed 800 companies and $31 billion of fair-value investments, with existing Ares Capital holders owning about 95% of the combined company.
- • Apollo-affiliated holders controlling 5.2% of MFIC common stock have signed voting and support agreements, and Wells Fargo committed $750 million of additional secured financing.
Summary
Ares Capital Corporation (NASDAQ: ARCC) and MidCap Financial Investment Corporation (NASDAQ: MFIC) announced a definitive merger agreement under which Ares Capital will acquire MFIC in a stock-and-cash transaction valued at approximately $2.6 billion in total enterprise value. The transaction was unanimously approved by both boards, with MFIC's board acting on the unanimous recommendation of its Special Committee of independent directors. Ares Capital described the deal as reinforcing its position as the largest publicly traded business development company (BDC) and strengthening the position of its parent, Ares Management Corporation (NYSE: ARES), as a leading direct lending platform to U.S. middle-market companies.
MFIC stockholders are expected to receive total consideration of $10.88 per fully diluted share, consisting of approximately $1.21 per share in cash, provided by a subsidiary of Ares Management, and approximately $9.67 per share in Ares Capital common stock. The stock component is reduced dollar-for-dollar for a special dividend MFIC will pay before closing to distribute its estimated undistributed taxable income. The exchange ratio uses the greater of Ares Capital's pre-closing NAV per share and its share price. MFIC holders will also share in 50% of any premium of Ares Capital's share price above NAV, up to 104.5% of NAV, equating to a maximum of 102.25% of NAV. The consideration represents premiums of approximately 30.1% to MFIC's October 26, 2026 closing price and 25.8% to its 30-day volume-weighted average price. MFIC's preliminary NAV per share as of September 30, 2026 is approximately $12.86.
Ares Capital says the deal will be modestly accretive to core earnings per share and support future dividends, and that it adds MFIC's senior secured portfolio at compelling current yields. Pro forma, the company would exceed 800 portfolio companies and more than $31 billion of investments at fair value as of September 30, 2026, add more than 200 incumbent positions, and expand its sponsor relationships to more than 600. Ares Capital CEO Kort Schnabel called the transaction a continuation of the company's track record of acquiring publicly traded BDCs, which includes Allied Capital and American Capital. CFO Scott Lem said the deal preserves balance sheet strength and financial flexibility. MFIC CEO Tanner Powell described the agreement as value-maximizing for MFIC stockholders, and Apollo's John Zito said Apollo will continue to grow its middle-market direct lending franchise, including through the MidCap Financial platform.
Apollo Principal Holdings A, L.P. and MidCap Financial Trust, affiliates of Apollo that together beneficially own 5.2% of MFIC's common stock, have signed voting and support agreements with Ares Capital. Ares Capital may issue up to approximately 41 million shares, though the total will be lower after the special dividend exchange-ratio adjustment. Excluding the special dividend effect, existing Ares Capital holders would own about 95% of the combined company and MFIC holders about 5%. Wells Fargo has agreed, subject to customary conditions, to provide $750 million of additional secured financing to support the deal. The transaction is expected to close in the first half of 2027, subject to MFIC stockholder approval, regulatory approvals and other customary conditions. Ares Capital will remain externally managed by Ares Capital Management LLC, with its current board and management team expected to stay in place.
Wells Fargo is exclusive financial advisor to Ares Capital, with Kirkland & Ellis and Latham & Watkins as legal counsel. Moelis & Company is financial advisor to MFIC's Special Committee, and Simpson Thacher & Bartlett is legal counsel to MFIC.
MFIC stockholders are expected to receive total consideration of $10.88 per fully diluted share, consisting of approximately $1.21 per share in cash, provided by a subsidiary of Ares Management, and approximately $9.67 per share in Ares Capital common stock. The stock component is reduced dollar-for-dollar for a special dividend MFIC will pay before closing to distribute its estimated undistributed taxable income. The exchange ratio uses the greater of Ares Capital's pre-closing NAV per share and its share price. MFIC holders will also share in 50% of any premium of Ares Capital's share price above NAV, up to 104.5% of NAV, equating to a maximum of 102.25% of NAV. The consideration represents premiums of approximately 30.1% to MFIC's October 26, 2026 closing price and 25.8% to its 30-day volume-weighted average price. MFIC's preliminary NAV per share as of September 30, 2026 is approximately $12.86.
Ares Capital says the deal will be modestly accretive to core earnings per share and support future dividends, and that it adds MFIC's senior secured portfolio at compelling current yields. Pro forma, the company would exceed 800 portfolio companies and more than $31 billion of investments at fair value as of September 30, 2026, add more than 200 incumbent positions, and expand its sponsor relationships to more than 600. Ares Capital CEO Kort Schnabel called the transaction a continuation of the company's track record of acquiring publicly traded BDCs, which includes Allied Capital and American Capital. CFO Scott Lem said the deal preserves balance sheet strength and financial flexibility. MFIC CEO Tanner Powell described the agreement as value-maximizing for MFIC stockholders, and Apollo's John Zito said Apollo will continue to grow its middle-market direct lending franchise, including through the MidCap Financial platform.
Apollo Principal Holdings A, L.P. and MidCap Financial Trust, affiliates of Apollo that together beneficially own 5.2% of MFIC's common stock, have signed voting and support agreements with Ares Capital. Ares Capital may issue up to approximately 41 million shares, though the total will be lower after the special dividend exchange-ratio adjustment. Excluding the special dividend effect, existing Ares Capital holders would own about 95% of the combined company and MFIC holders about 5%. Wells Fargo has agreed, subject to customary conditions, to provide $750 million of additional secured financing to support the deal. The transaction is expected to close in the first half of 2027, subject to MFIC stockholder approval, regulatory approvals and other customary conditions. Ares Capital will remain externally managed by Ares Capital Management LLC, with its current board and management team expected to stay in place.
Wells Fargo is exclusive financial advisor to Ares Capital, with Kirkland & Ellis and Latham & Watkins as legal counsel. Moelis & Company is financial advisor to MFIC's Special Committee, and Simpson Thacher & Bartlett is legal counsel to MFIC.
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