Ares Capital said on Tuesday it will buy Apollo’s MidCap Financial Investment Corp in a $2.6 billion cash-and-stock deal, adding to growing consolidation among publicly-traded private credit funds.
The acquisition strengthens Ares Capital’s presence in direct lending to mid-sized businesses and expands its portfolio to more than 800 companies across a broader range of industries and financial sponsors.
MidCap shareholders will receive $10.88 per fully diluted share, comprising about $1.21 in cash and $9.67 in Ares Capital stock.
The offer represents a premium of more than 30% to MidCap stock’s Monday close. MidCap shares jumped more than 24%.
BlackRock TCP Capital, Investcorp Credit Management BDC, and WhiteHorse Finance have all said this year they are weighing strategic options, suggesting consolidation among publicly traded private credit funds could pick up.
The vehicles are trading at steep discounts to net asset value as investors question the quality of the loans the funds have made.
With the acquisition, Ares Capital will have bought all three of the largest business development companies (BDCs) that were operating at the time of its 2004 IPO, Ares Capital CEO Kort Schnabel said, adding that the firm is well positioned to pursue further opportunities as they emerge.
“We have consistently used periods of market volatility and dislocation to create differentiated opportunities for our shareholders while building greater scale,” Schnabel added.
Ares Capital is the largest publicly traded BDC — vehicles that give investors access to a diversified pool of private credit assets — by market capitalisation.
“ARCC has had a successful track record of acquiring challenged BDC portfolios at a discount to NAV (Allied Capital, American Capital) and the MFIC transaction would seem similar to us,” RBC analyst Kenneth Lee said.
For Apollo, the deal marks another step in streamlining its portfolio of publicly traded investment vehicles.
The deal is expected to close in the first half of 2027 and boost Ares Capital’s core earnings per share.
Wells Fargo advised Ares Capital and is providing $750 million in financing for the deal. Moelis advised MidCap’s special committee.
Reuters
