Ares Capital agrees to buy MFIC from Apollo for $2.6 billion

Ares Capital agreed to acquire MidCap Financial Investment, the listed BDC managed by an Apollo Global Management affiliate, in a stock-and-cash transaction with an enterprise value of about $2.6 billion.

MFIC stockholders would receive $10.88 per fully diluted share: $1.21 in cash from a subsidiary of Ares Management and $9.67 in Ares Capital stock, according to HedgeCo News and Alternative Credit Investor. Both boards approved the merger unanimously, with MFIC's board acting on the recommendation of a special committee of independent directors.

For MFIC holders, the stock component is not fixed until closing, because the exchange ratio uses the greater of Ares Capital's net asset value per share and its share price. Holders capture half of any Ares stock premium above net asset value up to 104.5% of net asset value, and a pre-closing special dividend of undistributed taxable income reduces the stock component dollar for dollar.

The $10.88 headline value is 30.1% above the Oct. 26 close and 25.8% above the 30-day volume-weighted average price, but about 15% below MFIC's preliminary Sept. 30 net asset value estimate of $12.86. Holders are being paid a premium to a discounted share price rather than a premium to book.

Apollo affiliates holding 5.2% of MFIC signed voting and support agreements, and Wells Fargo agreed to provide $750 million of additional secured financing.

Ares Capital, described by the reports as the largest publicly traded BDC, would hold more than 800 portfolio companies and over $31 billion of investments at fair value as of Sept. 30 on a pro forma basis. MFIC adds more than 200 incumbent positions and widens the sponsor roster past 600. Ares Capital expects the deal to be modestly accretive to core earnings per share, and existing Ares holders would own about 95% of the combined company before the special dividend adjustment.

Closing is expected in the first half of 2027, subject to MFIC stockholder approval and regulatory approvals. At closing, the exchange ratio converts the $9.67 stock component into a final number of Ares shares.