Ares to Acquire MidCap in $2.6 Billion Deal
Key Facts
Ares Capital and MidCap Financial Investment Corporation agreed to a merger under which Ares will acquire MidCap in a cash-and-stock transaction with an aggregate enterprise value of about $2.6 billion, according to an announcement by the companies on October 27, 2026. The expected consideration is $10.88 for each diluted MidCap share, comprising about $1.21 in cash and $9.67 in Ares shares before adjustments related to a special distribution. The announced value represents a premium of about 30.1% to MidCap’s closing share price on October 26, and 25.8% to its volume-weighted average price over the 30 days ended on that date. The boards of both companies unanimously approved the agreement, following a unanimous recommendation from the special committee of independent directors at MidCap. The deal is expected to close in the first half of 2027, subject to MidCap shareholder and regulatory approvals and customary closing conditions.
The agreement includes a special distribution by MidCap before closing to distribute undistributed taxable income expected to remain at closing, and the distribution could be substantial. Ares’ stock component of the consideration will be reduced dollar-for-dollar to account for the value of that distribution. The number of Ares shares is also based on an exchange ratio tied to the higher of the company’s pre-closing net asset value and its share price, with a mechanism for sharing in any premium to net asset value. The stock component therefore remains linked to the special distribution and the exchange-ratio calculation, while cash makes up the other part of the consideration. Before accounting for the distribution’s effect, current Ares shareholders are expected to own about 95% of the combined company, compared with about 5% for MidCap shareholders.
Ares says the deal will add more than 200 existing investment positions to its portfolio and bring the number of sponsors it has worked with to more than 600. The company expects the combined portfolio to include more than 800 companies and its investments at fair value to exceed $31 billion, based on figures as of September 30, 2026. Ares also expects a modest increase in core earnings per share and support for future distributions. Wells Fargo has committed, subject to customary conditions, to provide an additional $750 million in secured financing that may be used to support the deal. These figures put the expansion of the investment base and existing positions among the key features of the merger announced by Ares.
Ares announced its third-quarter results on the same day, reporting core earnings of $0.46 per share, compared with $0.50 in the same period of 2025. Earnings per share under U.S. accounting standards were $0.44, versus $0.57 a year earlier. Chief Executive Officer Kurt Schnabel described the results as "solid." Ares’ net asset value was $19.31 per share on September 30, down from $19.94 on December 31, 2025. Portfolio investments at fair value totaled $29.213 billion at the end of September, compared with $29.485 billion at the end of the previous year.
Ares declared a fourth-quarter distribution of $0.48 per share, payable on December 29 to shareholders of record on December 15. At MidCap, net asset value per share was $13.37 on June 30, 2026, compared with $13.82 on March 31, a decline of 3.2% in the second quarter. The company attributed the decrease to portfolio losses and credit weakness concentrated in a limited number of positions. Realized losses and the change in unrealized gains totaled $50.3 million in the second quarter, compared with losses of $18.3 million in the same period of 2025. Net change in assets resulting from operations also turned to a decrease of $17.5 million, following an increase of $18.1 million a year earlier.
MidCap said share repurchases and investment income that exceeded distributions partly offset the effect of portfolio losses on net asset value. Chief Executive Officer Tanner Powell said the company repurchased $31.9 million of shares in the second quarter at below net asset value, adding about $0.07 per share to asset value, according to the company. Powell said future capital-allocation decisions would take leverage and market conditions into account. In trading on October 26, Ares shares closed at $18.61, and MidCap shares at $8.36. MidCap shareholder and regulatory approvals and customary closing conditions remain outstanding ahead of the deal’s expected completion in the first half of 2027.