$2.6 Billion Deal Brings Ares Capital and MidCap Financial Investment Together
Key Facts
Ares Capital and MidCap Financial Investment agreed to a definitive merger agreement in a cash-and-stock deal with an aggregate enterprise value of about $2.6 billion, Ares said in an announcement on October 27, 2026. The agreement is for MidCap Financial Investment Corporation, known as MFIC, rather than the MidCap Financial platform alone. Expected consideration for MFIC shareholders is $10.88 per fully diluted share, comprising about $1.21 in cash and $9.67 in Ares Capital shares. Ares said the cash component will be provided by a subsidiary of Ares Management, while the stock component remains subject to an adjustment related to the special distribution expected before closing. The deal establishes a disclosed minimum value for MFIC shareholders’ holdings while giving them a stake in the combined company through shares.
The consideration represents a premium of about 30.1% to MFIC’s closing share price on October 26, the last trading day before the announcement, and about 25.8% to its 30-day volume-weighted average price through the same date, according to Ares. MFIC initially estimated net asset value at $12.86 per share as of September 30, 2026, and is due to report the final figure in its third-quarter results scheduled for November 5. Before closing, MFIC expects to declare a special distribution to pay shareholders all of its undistributed taxable income remaining at that time. Ares’ stock component will be reduced by the same value to account for the distribution, under the agreement’s terms. The stock portion of the consideration is therefore linked to the special distribution, while the two premiums reflect MFIC’s share price on the preceding trading day and over the month ending before the announcement.
Ares expects its portfolio to exceed 800 companies after closing, with the fair value of its investments topping $31 billion, based on data as of September 30, 2026. MFIC’s portfolio is expected to add more than 200 existing positions and increase the number of sponsors Ares has worked with to more than 600. Current Ares shareholders are expected to own about 95% of the combined company, compared with about 5% for MFIC shareholders, before accounting for the effect of the special distribution. The companies said the deal would expand scale and portfolio diversification, and Ares expects a modest positive impact on core earnings per share and support for future distributions. These effects remain company-stated expectations, while the ownership percentages cited depend on completion of the deal under the announced terms.
The deal comes as Ares’ third-quarter results showed core earnings per share declining to $0.46 from $0.50 in the same quarter of 2025, and net investment income falling to $328 million from $338 million. New investment commitments also fell to $2.109 billion, compared with $3.924 billion in the third quarter of the prior year. Non-accrual loans were 2.4% of total investments at amortized cost on September 30, versus 1.8% on December 31, 2025. Ares also announced a fourth-quarter 2026 distribution of $0.48 per share, payable on December 29 to shareholders of record on December 15. Ares shares, trading under the ticker ARCC, closed at $18.61 on October 26, according to EL7 data.
Wells Fargo agreed, subject to customary terms, to provide an additional $750 million in secured financing that could be used to support the deal. Ares is expected to file a registration statement containing a proxy statement and prospectus ahead of a vote by MFIC shareholders on the agreement. The companies are targeting completion in the first half of 2027, subject to MFIC shareholder approval, regulatory approvals and customary closing conditions. Before then, MFIC’s results on November 5 are expected to include its final net asset value as of September 30. Completion of the merger remains contingent on securing the required approvals, while the announcement set the first half of 2027 as the target timeframe for closing.