Ares-Medcap $2.6 Billion Deal Gives Medcap Shareholders a 30.1% Premium
Key Facts
Ares Capital and Medcap Financial announced a definitive merger agreement on October 27 with an enterprise value of approximately $2.6 billion, after unanimous approval by both companies’ boards, according to an Ares statement. The agreement provides for Medcap shareholders to receive $10.88 per fully diluted share at closing. The consideration comprises about $1.21 in cash and $9.67 in Ares shares, with the stock component subject to adjustment for Medcap special distributions. That represents a premium of approximately 30.1% to Medcap’s closing share price on October 26 and 25.8% to its 30-day volume-weighted average price through that date. Ares said the deal expands its scale, diversification and market presence, and that it expects it to support core earnings per share and future distributions.
Ares expects its portfolio to exceed 800 portfolio companies after the deal closes, with investments of more than $31 billion at fair value, based on figures as of September 30, 2026. Its chief executive said the deal adds a diversified portfolio alongside borrower and sponsor relationships. The company also expects the deal to be “slightly accretive to core earnings per share” and to support future distributions. This comes as Ares reported third-quarter core earnings per share of $0.46, compared with $0.50 a year earlier. Net investment income fell to $328 million from $338 million in the year-earlier period, according to the company’s results.
Investment activity in the third quarter presented a slower picture than the increase in reviews of potential opportunities. Ares’ new gross investment commitments totaled $2.109 billion, compared with $3.924 billion in the third quarter of 2025. Exits totaled $2.473 billion, compared with $2.625 billion a year earlier. Management said the number of transactions it had reviewed since the start of the year was about 25% higher than in the same period a year earlier, and that the value of potential investment opportunities reviewed over the past twelve months exceeded $1 trillion. The chief executive said the company reviewed more transactions in the third quarter than a year earlier, but added that slower investment originations partly reflected longer deal timelines and market uncertainty.
Management said post-quarter deal activity and the pipeline of investments pending close had reached historically strong levels, bolstering its optimism about a recovery in investment activity. Ares enters the deal with about $7 billion in available liquidity after the third quarter, while the company said its balance sheet is positioned to support investment and growth. Wells Fargo also agreed, subject to customary conditions, to provide an additional $750 million of secured financing that could be used to support the deal. On financial metrics, Ares’ net asset value was $19.31 per share on September 30, compared with $19.94 on December 31, 2025, and its debt-to-equity ratio declined to 1.11 times from 1.12 times. Ares declared a regular distribution of $0.48 per share for the fourth quarter of 2026, payable on December 29 to shareholders of record on December 15.
Medcap initially estimated its net asset value at about $12.86 per share on September 30, 2026. It is expected to announce the final figure with its third-quarter results on November 5, and it may differ from the initial estimate. The deal is expected to close in the first half of 2027, subject to approval by Medcap shareholders, regulatory approvals and satisfaction of customary closing conditions. Ares shares closed at $18.51 on October 27, while Medcap shares ended the session at $10.26. These dates put the shareholder vote and final net asset value figure among the next milestones ahead of the expected deal closing.