Ares Capital Corp., the largest publicly traded business development company, agreed to acquire MidCap Financial Investment Corp., a lender managed by an affiliate of Apollo Global Management Inc., in a cash-and-stock deal with an enterprise value of about $2.6 billion.
MFIC shareholders are set to receive total consideration of about $10.88 a share, made up of roughly $1.21 in cash supplied by a subsidiary of Ares Management Corp. and about $9.67 in Ares Capital stock, the companies said Tuesday. The price is about 30% above MFIC’s closing price on Monday and about 26% above its 30-day volume-weighted average. It is still below MFIC’s preliminary estimate of net asset value of about $12.86 a share as of Sept. 30.
How the price works
Before closing, MFIC plans to pay a special dividend that distributes its remaining undistributed taxable income, and the stock portion will be cut dollar for dollar to reflect it. The number of Ares Capital shares will be based on the greater of the company’s net asset value per share and its stock price, and MFIC holders will share in half of any premium of Ares Capital’s stock over NAV up to a cap. Ares Capital may issue up to about 41 million shares, leaving existing Ares Capital holders with about 95% of the combined company before accounting for the special dividend.
Ares Capital said the deal should be modestly accretive to core earnings per share. On a pro forma basis the combined lender would hold investments in more than 800 companies with a fair value above $31 billion, and MFIC’s book would add more than 200 existing positions. Wells Fargo has agreed to provide $750 million of additional secured financing that can support the transaction.
Private credit under pressure
The deal lands as private credit managers have been looking to sell underperforming funds this year amid broader market turmoil and investor redemptions. Apollo said it has taken steps this year to support shareholder value across its public vehicles and that it will keep growing its middle-market direct lending business through the MidCap Financial platform. Apollo affiliates that together own 5.2% of MFIC’s stock have agreed to vote in favor.
Wells Fargo is Ares Capital’s exclusive financial adviser, with Kirkland & Ellis and Latham & Watkins as legal counsel. Moelis & Co. advised MFIC’s special committee, and Simpson Thacher & Bartlett is counsel to MFIC. The transaction is expected to close in the first half of 2027, subject to MFIC shareholder approval and regulatory clearances.
