Ares Capital to acquire MidCap Financial for $2.6B in cash and stock; MFICL rallies 15%

Ares Capital (ARCC) has agreed to acquire MidCap Financial Investment (MFICL) in a stock-and-cash deal valued at ~$2.6B in total enterprise value, the companies said Tuesday.

The transaction is expected to further strengthen Ares Capital’s position as the largest publicly traded business development company and Ares Management Corporation’s (ARES) broader position as a leading direct lending platform to U.S. middle-market companies.

The deal is expected to be modestly accretive to Ares Capital’s core earnings per share, further supporting future dividends. The combined company and its affiliates expect to benefit from MFIC’s portfolio of senior secured investments with compelling current yields. MFIC shares rallied 15% in premarket trading, while ARCC shed 3.3%.

Under the terms of the transaction, MFIC stockholders are expected to receive total consideration of $10.88 per fully diluted share of MFIC common stock, consisting of approximately $1.21 per share in cash, provided by a subsidiary of Ares Management (ARES), and approximately $9.67 per share in Ares Capital common stock.

In connection with the transaction, Apollo Principal Holdings A, L.P. and MidCap Financial Trust, each an affiliate of Apollo Management and which together beneficially own 5.2% of MFIC’s outstanding common stock, have entered into voting and support agreements with Ares Capital.

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