Key Takeaways
- • Ares Capital has agreed to acquire MidCap Financial Investment (MFIC) from Apollo in a stock-and-cash transaction valued at an enterprise value of approximately $2.6bn (£1.9bn), per the primary source.
- • Shareholders in MFIC will receive $10.88 per fully diluted share, consisting of $1.21 in cash from a subsidiary of Ares Management and $9.67 in Ares Capital stock.
- • The deal is expected to be "modestly accretive" to Ares Capital's core earnings per share and would lift its pro forma portfolio to more than 800 portfolio companies and over $31bn of investments at fair value as of September 30.
- • The transaction is expected to close in the first half of 2027, subject to MFIC stockholder approval and regulatory approvals.
Summary
Ares Capital has agreed to acquire MidCap Financial Investment (MFIC), a closed-end diversified management investment company externally managed by a subsidiary of Apollo Global Management, in a stock-and-cash transaction with an enterprise value of approximately $2.6bn (£1.9bn). Under the definitive merger agreement, MFIC shareholders will receive $10.88 per fully diluted share, comprising $1.21 per share in cash, provided by a subsidiary of Ares Management, and $9.67 per share in Ares Capital common stock. The transaction cements Ares Capital's position as the largest publicly traded business development company (BDC), which is managed externally by a subsidiary of Ares Management.
According to the announcement, the deal is expected to be "modestly accretive" to Ares Capital's core earnings per share. Following completion, Ares Capital's pro forma portfolio will expand to more than 800 portfolio companies and over $31bn of investments at fair value as of September 30. MFIC's portfolio is expected to add more than 200 incumbent positions and increase the number of sponsors Ares Capital transacts with to more than 600. The combined company will benefit from MFIC's portfolio of senior secured investments, which the company describes as offering "compelling current yields." The acquisition is also expected to further strengthen Ares Management's position as a direct lending platform to US middle-market companies.
Kort Schnabel, chief executive of Ares Capital, said the transaction brings a diversified portfolio and valuable borrower and sponsor relationships that will bolster the long-term growth profile of the company. Scott Lem, chief financial officer and treasurer, called the financial merits "compelling" and said the deal is expected to be accretive to core earnings and supportive of future dividends. John Zito, co-president of Apollo Asset Management, said Apollo will continue to invest in and grow its middle-market direct lending franchise, including through the MidCap Financial platform.
The transaction is set to close in the first half of 2027, subject to approval by MFIC stockholders and regulatory approvals. Upon completion, Ares Capital will remain externally managed by Ares Capital Management, and its existing board and management team are expected to stay in place.
According to the announcement, the deal is expected to be "modestly accretive" to Ares Capital's core earnings per share. Following completion, Ares Capital's pro forma portfolio will expand to more than 800 portfolio companies and over $31bn of investments at fair value as of September 30. MFIC's portfolio is expected to add more than 200 incumbent positions and increase the number of sponsors Ares Capital transacts with to more than 600. The combined company will benefit from MFIC's portfolio of senior secured investments, which the company describes as offering "compelling current yields." The acquisition is also expected to further strengthen Ares Management's position as a direct lending platform to US middle-market companies.
Kort Schnabel, chief executive of Ares Capital, said the transaction brings a diversified portfolio and valuable borrower and sponsor relationships that will bolster the long-term growth profile of the company. Scott Lem, chief financial officer and treasurer, called the financial merits "compelling" and said the deal is expected to be accretive to core earnings and supportive of future dividends. John Zito, co-president of Apollo Asset Management, said Apollo will continue to invest in and grow its middle-market direct lending franchise, including through the MidCap Financial platform.
The transaction is set to close in the first half of 2027, subject to approval by MFIC stockholders and regulatory approvals. Upon completion, Ares Capital will remain externally managed by Ares Capital Management, and its existing board and management team are expected to stay in place.
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