Ares Capital Corporation (NASDAQ:ARCC) announced on October 27, 2026, that it has entered into a definitive agreement to acquire MidCap Financial Investment Corporation (NASDAQ:MFIC) in a stock-and-cash transaction valued at approximately $2.6 billion.
The agreement provides for total consideration of $10.88 per fully diluted MFIC share, representing a 30.1% premium to the company’s closing share price on October 26, 2026.
Ares Capital expects the acquisition to increase its investment portfolio to more than $31 billion in fair value, expand its borrower and sponsor relationships, and contribute modestly to core earnings per share.
The transaction has received unanimous approval from both companies’ boards of directors and is expected to close during the first half of 2027, subject to shareholder and regulatory approvals.
Why Is Ares Capital Acquiring MidCap Financial Investment Corporation?
Ares Capital said the proposed acquisition is intended to expand its investment portfolio, increase diversification and strengthen its position in the U.S. middle-market direct lending sector.
The combination would bring together two publicly traded business development companies (BDCs) that primarily provide financing to privately held businesses.
Ares Capital is currently the largest publicly traded BDC by market capitalization, while MFIC operates a diversified portfolio focused primarily on senior secured lending to U.S. middle-market companies.
The acquisition is expected to increase the combined company’s exposure across borrowers, industries and financial sponsors.
Management also anticipates that the transaction will contribute modestly to Ares Capital’s core earnings per share and support future dividend payments.
How Much Will Ares Capital Pay for MidCap Financial?
The transaction has an estimated total enterprise value of approximately $2.6 billion.
Under the agreement, MFIC shareholders are expected to receive total consideration of $10.88 per fully diluted share.
This consists of approximately $1.21 per share in cash, provided by a subsidiary of Ares Management Corporation (NYSE:ARES), and approximately $9.67 per share in Ares Capital common stock.
The final stock consideration will be adjusted to account for a special dividend that MFIC expects to distribute before completion.
The exchange ratio will also depend on Ares Capital’s net asset value per share and market share price under the terms of the merger agreement.
What Premium Does the Acquisition Offer MFIC Shareholders?
The proposed consideration of $10.88 per MFIC share represents a premium of approximately 30.1% to the company’s closing share price on October 26, 2026.
It also represents a premium of 25.8% to MFIC’s 30-day volume-weighted average share price for the period ending October 26.
MFIC reported a preliminary estimated net asset value of approximately $12.86 per share as of September 30, 2026.
The transaction consideration is therefore below the company’s preliminary estimated net asset value, despite being above its recent market trading price.
The final value received by shareholders will depend partly on the stock consideration and the special dividend adjustment.
How Will the Stock-and-Cash Consideration Be Calculated?
MFIC shareholders will receive a combination of cash and newly issued Ares Capital shares.
The cash component is expected to total approximately $1.21 per MFIC share.
The stock component is initially valued at approximately $9.67 per share, before adjustments relating to MFIC’s planned special dividend.
The exchange ratio will be calculated using a value for Ares Capital shares equal to the greater of the company’s net asset value per share immediately before closing or its market share price.
MFIC shareholders will also participate in 50% of any premium of Ares Capital’s share price above net asset value, up to a share price equivalent to 104.5% of net asset value. This mechanism provides a maximum exchange valuation of 102.25% of net asset value.
The arrangement means the final number of Ares Capital shares issued will depend on the applicable valuation and dividend adjustments.
Will MFIC Shareholders Receive a Special Dividend?
MFIC expects to declare and pay a special dividend before the acquisition closes.
The distribution is intended to cover all undistributed taxable income estimated to remain at the time of completion.
The company indicated that the dividend is expected to be meaningful, although no amount has been announced.
Under the transaction terms, the value of the Ares Capital stock consideration will be reduced dollar for dollar to reflect the special dividend.
The adjustment is intended to account for the value distributed to MFIC shareholders before the merger is completed.
How Large Will the Combined Investment Portfolio Be?
Ares Capital expects the acquisition to increase its investment portfolio to more than $31 billion in fair value, based on investment valuations as of September 30, 2026.
The combined portfolio is expected to include investments in more than 800 companies.
MFIC’s existing portfolio will contribute additional senior secured investments and expand the range of borrowers represented within Ares Capital’s portfolio.
The transaction is also expected to add more than 200 incumbent investment positions.
These additions will increase the scale of the combined company’s direct lending activities across the U.S. middle-market sector.
How Will the Acquisition Affect Ares Capital’s Lending Relationships?
The acquisition is expected to expand Ares Capital’s relationships with financial sponsors and borrowers.
Following completion, Ares Capital expects the number of sponsors with which it has completed transactions to exceed 600.
The addition of MFIC’s existing lending relationships could provide opportunities for future financing transactions with borrowers already represented in the acquired portfolio.
The company identified the expansion of its sponsor network as one of the anticipated operational benefits of the combination.
Will the Transaction Increase Ares Capital’s Earnings?
Ares Capital expects the acquisition to be modestly accretive to core earnings per share.
Earnings accretion would mean that the combined company’s core earnings per share are higher than they otherwise would have been without the transaction.
Management also expects the acquisition to support future dividend payments.
However, the company did not provide a specific earnings accretion percentage or a detailed forecast of the transaction’s effect on annual earnings.
The financial benefits remain projections and will depend on the completion of the acquisition and subsequent performance of the combined investment portfolio.
What Did Ares Capital’s Chief Executive Say About the Acquisition?
Kort Schnabel, Chief Executive Officer of Ares Capital, commented on the company’s expectations for the proposed transaction.
“We’re excited to announce our acquisition of MFIC, which we believe reinforces our leading competitive position, advances our strategic goals and enhances the earnings power of our company,” Schnabel said.
“The MFIC transaction brings a diversified portfolio and valuable borrower and sponsor relationships, which, when combined with our differentiated private credit investment capabilities, we expect will bolster the long-term growth profile of Ares Capital. In addition, we believe this transaction will further build on our successful track record of acquiring publicly traded BDCs and supporting attractive risk-adjusted returns over time.”
The comments reflect management’s expectations for portfolio diversification, investment relationships and earnings following the acquisition.
What Did Ares Capital’s Chief Financial Officer Say?
Scott Lem, Chief Financial Officer and Treasurer of Ares Capital, addressed the expected financial effects of the agreement.
“We believe the financial merits of this transaction are compelling,” Lem said.
“We expect the transaction to be accretive to core earnings and supportive of our future dividends, while preserving the balance sheet strength and financial flexibility that have been central to Ares Capital’s long-term performance. Importantly, the financial support from Ares Management will provide MFIC stockholders with additional cash value alongside attractive equity in Ares Capital’s industry-leading business.”
The transaction includes a cash contribution from a subsidiary of Ares Management alongside the stock consideration provided by Ares Capital.
What Does MFIC Management Say About the Agreement?
Tanner Powell, Executive Chairman and Chief Executive Officer of MFIC, commented on the proposed acquisition.
“This agreement with Ares Capital represents a value-maximizing transaction that we are pleased to deliver for MFIC stockholders,” Powell said.
“It provides value meaningfully above MFIC’s current stock price and gives our stockholders an investment in the largest publicly traded BDC, which has a history of creating stockholder value through successful acquisitions. MFIC’s investment adviser and Board, upon recommendation of its Special Committee, have concluded that this transaction represents the best path forward for MFIC’s stockholders.”
The MFIC board unanimously approved the agreement following a unanimous recommendation from a special committee of independent directors.
What Role Does Apollo Have in the Transaction?
MFIC is externally managed by Apollo Investment Management, an affiliate of Apollo Global Management.
Apollo Principal Holdings A, L.P. and MidCap Financial Trust, both affiliated with Apollo Management, collectively beneficially own approximately 5.2% of MFIC’s outstanding common shares.
These entities have entered into voting and support agreements with Ares Capital in connection with the acquisition.
John Zito, Co-President of Apollo Asset Management, also commented on the transaction.
“Apollo has long been committed to delivering positive outcomes wherever we manage investor capital,” Zito said.
“Throughout this year we have taken active steps to support stockholder value across our public vehicles, including through this transaction. Importantly, Apollo will continue to invest in and grow our middle-market direct lending franchise, including through the MidCap Financial platform.”
Apollo indicated that it intends to continue its middle-market lending activities following the proposed transaction.
How Many New Ares Capital Shares Could Be Issued?
Ares Capital may issue up to approximately 41 million common shares to MFIC shareholders under the merger agreement.
The company expects the actual number issued to be lower because of the exchange ratio adjustment associated with MFIC’s special dividend.
Following completion, existing Ares Capital shareholders are expected to own approximately 95% of the combined company.
Existing MFIC shareholders are expected to own approximately 5%.
These ownership estimates exclude the effects of the planned MFIC special dividend and remain subject to the final transaction calculations.
How Will the Acquisition Be Financed?
The transaction includes cash consideration provided by a subsidiary of Ares Management and newly issued Ares Capital common shares.
Wells Fargo has also agreed to provide $750 million of additional secured financing, subject to customary conditions.
The financing may be used to support the transaction.
The company did not provide a detailed allocation of the additional financing in the announcement.
When Is the Acquisition Expected to Close?
Ares Capital and MFIC expect the transaction to close during the first half of 2027.
Completion remains subject to approval by MFIC shareholders, applicable regulatory approvals and other customary closing conditions.
Both boards have unanimously approved the merger agreement.
Until completion, MFIC will continue operating its business in the ordinary course, subject to interim operating restrictions included in the agreement.
There is no guarantee that the transaction will close within the anticipated timetable.
Who Will Manage the Combined Company?
Following completion, Ares Capital will continue to be externally managed by Ares Capital Management LLC.
The existing Ares Capital board of directors and management team are expected to remain in place.
The transaction therefore does not currently anticipate changes to Ares Capital’s principal management structure.
MFIC’s investment portfolio will be incorporated into the combined company following completion, subject to the terms of the merger.
Which Financial and Legal Advisers Are Involved?
Wells Fargo is serving as exclusive financial adviser to Ares Capital.
Kirkland & Ellis LLP and Latham & Watkins LLP are acting as legal counsel to Ares Capital, while Eversheds Sutherland (US) LLP is advising its independent directors.
Simpson Thacher & Bartlett LLP is serving as legal counsel to MFIC.
Moelis & Company LLC is acting as financial adviser to MFIC’s special committee, with Willkie Farr & Gallagher LLP and Stradley Ronon Stevens & Young, LLP providing legal advice to the committee.
What Should Investors Monitor Before the Transaction Closes?
The proposed acquisition would expand Ares Capital’s investment portfolio to more than $31 billion and increase the number of portfolio companies to more than 800.
The transaction also includes a combination of cash and stock consideration, a planned special dividend for MFIC shareholders and potential issuance of up to approximately 41 million Ares Capital shares.
The companies expect the merger to contribute modestly to core earnings per share, although the financial effects will depend on completion and subsequent portfolio performance.
Key developments before closing include the MFIC shareholder vote, regulatory approvals, the amount of the special dividend and the final exchange ratio.
The transaction is expected to close in the first half of 2027.
More About Ares Capital and MidCap Financial Investment Corporation
Ares Capital Corporation is a publicly traded business development company founded in 2004. It provides direct loans and other investments to private middle-market businesses in the United States and is externally managed by a subsidiary of Ares Management Corporation.
MidCap Financial Investment Corporation is an externally managed business development company focused primarily on senior secured loans to privately held U.S. middle-market companies. It is managed by Apollo Investment Management, an affiliate of Apollo Global Management.
Both companies operate in the direct lending market, providing financing to businesses through investments in debt and other securities.