Ares Capital Agrees to $2.6 Billion Merger With MidCap, Reports Core Earnings of $0.46
Key Facts
Ares Capital and MidCap Financial Investment Corporation agreed to a definitive cash-and-stock merger with an enterprise value of about $2.6 billion, according to a statement from the companies dated October 27, 2026. The announcement coincided with Ares’ third-quarter results, as core earnings came to $0.46 per share, compared with $0.50 in the same period last year. Net investment income also fell to $328 million, or $0.46 per share, from $338 million and $0.48 per share a year earlier. Net income under U.S. accounting standards was $319 million, or $0.44 per share, versus $404 million and $0.57 per share in the third quarter of 2025. The deal combines weaker quarterly results than a year earlier with a plan to expand the direct-lending platform by merging the companies’ portfolios.
Under the terms of the agreement, MidCap shareholders will receive $10.88 for each fully diluted share, including about $1.21 in cash and $9.67 in Ares Capital shares. The consideration represents a 30.1% premium to MidCap’s closing share price on October 26 and a 25.8% premium to its 30-day volume-weighted average price through that date. Ares said the merger is expected to increase its portfolio, based on September 30, 2026 data, to more than 800 portfolio companies, with investments exceeding $31 billion at fair value. It will also add more than 200 existing investment positions. The company expects the deal to be modestly accretive to core earnings per share and to help support future distributions.
The deal announcement coincided with slower activity in Ares’ new investment commitments. Gross new commitments totaled $2.109 billion in the third quarter, compared with $3.924 billion in the corresponding period of 2025. Meanwhile, exits from commitments totaled $2.473 billion, compared with $2.625 billion a year earlier. The chief executive said a slower transaction environment led to a more measured pace of investment formation during the quarter. He added that the investment pipeline had increased substantially from the previous quarter and that activity was stronger entering the fourth quarter.
Portfolio data show investments at fair value declined to $29.213 billion on September 30, from $29.485 billion at the end of 2025. Net asset value per share was $19.31 at the end of September, compared with $19.94 on December 31, 2025. On credit quality, non-accrual loans represented 2.4% of total investments at cost, or 1.4% at fair value, on September 30. Management said the ratio was stable compared with the previous quarter. The weighted average yield on debt and income-producing securities at fair value was 10.8%, compared with 10.3% at the end of 2025.
On financing, the chief executive said Ares issued $750 million of seven-year unsecured notes during the third quarter. Available liquidity was about $7 billion, the company said. These figures provide context on the company’s funding resources, announced alongside the quarterly results and merger agreement. In the market, MidCap shares rose more than 24% after the deal was announced on October 27, according to Reuters. Ares Capital shares closed at $18.51 the same day, according to EL7 data.
Ares declared a regular fourth-quarter distribution of $0.48 per share, payable on December 29 to shareholders of record on December 15, 2026. The deal remains subject to approval by MidCap shareholders, regulatory approvals and customary closing conditions. The companies expect to complete it in the first half of 2027. The announced expansion is therefore set to proceed after the required approvals are secured, while the declared distribution is the next specified date for shareholders. Ares describes the deal as expanding and diversifying its portfolio and strengthening its ability to generate investment opportunities, with an expected modest effect on core earnings per share.