Ares Capital to Acquire MidCap Financial in $2.6bn Stock-and-Cash Deal

Ares Capital Corporation (NASDAQ:ARCC) has agreed to acquire MidCap Financial Investment Corporation (NASDAQ:MFIC) in a stock-and-cash transaction valued at approximately $2.6 billion, the companies announced. The merger agreement was unanimously approved by both boards, with MFIC's board acting on the unanimous recommendation of its special committee of independent directors.

MFIC stockholders are expected to receive total consideration of $10.88 per fully diluted share, comprising approximately $1.21 per share in cash, funded by a subsidiary of Ares Management, and approximately $9.67 per share in Ares Capital common stock. The stock component will be adjusted for a special dividend that MFIC expects to declare and pay prior to closing, distributing all of its undistributed taxable income estimated to remain as of the closing. The Ares Capital stock consideration will be reduced dollar-for-dollar to account for the special dividend, with the number of shares calculated using an exchange ratio based on the greater of Ares Capital's net asset value (NAV) per share prior to closing and its share price. MFIC stockholders will also share in 50% of any premium of Ares Capital's share price over NAV, up to 104.5% of NAV, representing a maximum of 102.25% of NAV.

The $10.88 per share consideration represents a premium of approximately 30.1% to MFIC's closing share price on October 26, 2026, the last trading day before the announcement, and a premium of approximately 25.8% to MFIC's 30-day volume-weighted average share price for the period ending October 26, 2026. MFIC's preliminary estimate of NAV per share as of September 30, 2026, is approximately $12.86.

Kort Schnabel, Chief Executive Officer of Ares Capital, said the acquisition is expected to reinforce the company's competitive position and enhance earnings power, adding that MFIC brings a diversified portfolio and valuable borrower and sponsor relationships. Scott Lem, Chief Financial Officer and Treasurer of Ares Capital, said the transaction is expected to be accretive to core earnings and supportive of future dividends, while the financial support from Ares Management will provide MFIC stockholders with additional cash value alongside equity in Ares Capital.

Tanner Powell, Executive Chairman and Chief Executive Officer of MFIC, said the agreement represents a value-maximizing transaction for MFIC stockholders, providing value meaningfully above MFIC's current stock price and an investment in the largest publicly traded BDC. John Zito, Co-President of Apollo Asset Management, said Apollo will continue to invest in and grow its middle-market direct lending franchise, including through the MidCap Financial platform.

Apollo Principal Holdings A, L.P. and MidCap Financial Trust, each an affiliate of Apollo Management and together beneficial owners of 5.2% of MFIC's outstanding common stock, have entered into voting and support agreements with Ares Capital. Wells Fargo has agreed, subject to customary conditions, to provide $750 million of additional secured financing that can be used to support the transaction.

The transaction is expected to close in the first half of 2027, subject to approval by MFIC stockholders, applicable regulatory approvals and other customary closing conditions. Upon completion, Ares Capital will continue to be externally managed by Ares Capital Management LLC, and the existing Ares Capital board and management team are expected to remain in place.

Wells Fargo is serving as exclusive financial advisor to Ares Capital, with Kirkland & Ellis LLP and Latham & Watkins LLP as legal counsel. Eversheds Sutherland (US) LLP is legal counsel to Ares Capital's independent directors. Simpson Thacher & Bartlett LLP is legal counsel to MFIC. Moelis & Company LLC is financial advisor to MFIC's special committee, with Willkie Farr & Gallagher LLP and Stradley Ronon Stevens & Young, LLP as legal counsel.