HedgeCo.Net — Ares Capital Corporation, the largest publicly traded business development company, has agreed to acquire MidCap Financial Investment Corporation, the listed BDC externally managed by an affiliate of Apollo Global Management, in a stock-and-cash transaction valued at a total enterprise value of about $2.6 billion. The boards of both companies approved the merger unanimously, with MFIC’s board acting on the recommendation of a special committee of independent directors.
MFIC stockholders are expected to receive total consideration of $10.88 per fully diluted share, made up of about $1.21 in cash provided by a subsidiary of Ares Management and about $9.67 in Ares Capital stock. The price is a premium of roughly 30.1% to MFIC’s October 26 close and about 25.8% to its 30-day volume-weighted average price. It is still below MFIC’s preliminary net asset value estimate of about $12.86 per share as of September 30, a gap that frames the deal as a premium to a discounted share price rather than a premium to book.
The structure has several moving parts. Before closing, MFIC expects to pay a special dividend of its undistributed taxable income, and the Ares Capital stock component will be reduced dollar for dollar to reflect it. The exchange ratio uses the greater of Ares Capital’s NAV per share and its share price, and MFIC holders share in half of any premium of Ares Capital’s stock above NAV up to 104.5% of NAV. 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 said the combination should be modestly accretive to core earnings and lift its pro forma portfolio to more than 800 companies and over $31 billion of investments at fair value. MFIC adds more than 200 incumbent positions and widens Ares Capital’s sponsor relationships to more than 600. Existing Ares Capital 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 and regulatory approvals.
For private credit, the deal is another sign that scale is becoming the main answer to listed BDCs trading below asset value. Ares Capital has grown before through acquisitions of Allied Capital and American Capital, and Apollo said it will keep building its middle-market lending franchise through the MidCap Financial platform. Allocators will be watching whether other sub-scale BDCs trading at discounts are consolidated in the same way, and how the special dividend and NAV-linked exchange ratio settle MFIC’s final value.