Ares Capital Agrees to $2.6 Billion Merger With MidCap

Key Facts

Ares Capital and MidCap Financial Investment agreed to a definitive cash-and-stock merger with an enterprise value of about $2.6 billion, in a deal Ares announced on October 27, 2026. The agreement coincides with Ares reporting core earnings of $0.46 per share in the third quarter, down from $0.50 a year earlier. Net investment income also fell to $328 million from $338 million in the comparable period, according to the company’s results. Net income under U.S. accounting standards declined to $319 million, or $0.44 per share, compared with $404 million and $0.57 per share in the third quarter of 2025. The deal combines an expected expansion of the direct lending platform with annual declines in profitability metrics and new investment commitments.

Under the announced terms, MidCap shareholders are expected to receive $10.88 for each fully diluted share, consisting of about $1.21 in cash and $9.67 in Ares shares. The value of the stock component is subject to adjustments tied to the special distribution and the exchange ratio mechanism, taking into account Ares’ net asset value and share price. The consideration represents a premium of 30.1% to MidCap’s closing price on October 26 and 25.8% to its volume-weighted average price over the thirty days ended on that date. MidCap may make a special distribution before closing to distribute undistributed taxable income, with the Ares stock component reduced by the same amount. The exchange mechanism allows MidCap shareholders to participate in 50% of any premium of Ares’ share price over net asset value, within limits of up to 104.5% of net asset value, and capped at an amount equal to 102.25% of it.

Ares expects the deal to add more than 200 existing portfolio companies and raise its total to more than 800, with investments exceeding $31 billion at fair value based on data as of September 30, 2026. The number of sponsors with which the company has worked is also expected to exceed 600 after the deal closes. Ares said MidCap’s assets consist of investments secured by substantial assets and offering attractive current yields. The company expects the merger to be modestly accretive to core earnings per share and to support future distributions. Two Apollo affiliates, which together own 5.2% of MidCap’s outstanding common shares, signed voting and support agreements with Ares regarding the deal.

Ares’ new gross investment commitments fell to $2.109 billion in the third quarter, from $3.924 billion in the comparable period of 2025. Exits from commitments totaled $2.473 billion, compared with $2.625 billion a year earlier. Management attributed slower investment origination to extended deal timelines, while saying deal review remained strong. Transaction reviews since the start of the year were up about 25% year over year through October 27. The company announced that it had closed $1.1 billion in commitments in the fourth quarter through October 22, with a pipeline of investment opportunities of about $2.5 billion as of that date.

Ares’ investments at fair value totaled $29.213 billion on September 30, compared with $29.485 billion at the end of 2025. Net asset value per share fell to $19.31 from $19.94 on the same dates, respectively. Non-accrual loans represented 2.4% of investments at cost and 1.4% at fair value at the end of September, with both ratios stable compared with the previous quarter. The weighted average yield on debt and income-producing securities at fair value was 10.8%, up from 10.3% at the end of 2025. These figures provide a picture of the portfolio’s size, credit quality and returns during the period.

Ares announced a $750 million, seven-year unsecured notes issuance in September 2026 and said available liquidity was close to $7 billion on September 30. MidCap shares jumped more than 24% on October 27 after the deal announcement, according to a Reuters report published via MarketScreener. Ares shares closed at $18.51 the same day, according to EL7 data. The company declared a fourth-quarter distribution of $0.48 per share, payable on December 29 to shareholders of record on December 15, 2026. The deal is expected to close in the first half of 2027, subject to approval by MidCap shareholders, regulatory approvals and customary closing conditions.