Ares Capital agrees to buy MidCap Financial Investment in $2.6 billion deal

The cash-and-stock transaction would expand Ares Capital's direct-lending portfolio to more than 800 companies, subject to shareholder and regulatory approvals.

A larger direct-lending platform

Ares Capital Corporation agreed to acquire MidCap Financial Investment Corporation in a stock-and-cash transaction carrying an enterprise value of about $2.6 billion, the companies announced Tuesday. The boards approved the agreement, which remains subject to MFIC shareholder approval, regulatory clearance and customary closing conditions.^[1][2]

MFIC shareholders are expected to receive total consideration of $10.88 per diluted share: about $1.21 in cash and $9.67 in Ares Capital stock, adjusted for a planned special dividend. The announced value represented a 30.1% premium to MFIC's October 26 closing price, according to the companies.^[1][2]

Scale, financing and ownership

Ares said the combination would increase its pro forma portfolio to more than 800 companies and over $31 billion of investments at fair value, based on September 30 figures. Existing Ares Capital holders are expected to own roughly 95% of the combined company, before accounting for the special-dividend adjustment.^[1]

Wells Fargo agreed to provide $750 million of additional secured financing that can support the transaction. Ares expects the acquisition to be modestly accretive to core earnings per share, but that is a company forecast rather than a guaranteed outcome and depends on portfolio performance and the final exchange mechanics.^[1][2]

Why investors are watching

The deal comes as publicly traded business development companies face pressure over loan quality and discounts to reported net asset value. Reuters reported that MFIC traded at a particularly steep discount before the announcement, giving Ares an opportunity to use more highly valued shares to acquire a larger loan portfolio.^[2][3]

The next milestones are MFIC's shareholder vote, regulatory reviews and final calculation of the special dividend and stock exchange ratio. The parties target a first-half 2027 closing, after which Ares Capital's existing board and management team are expected to remain in place.^[1][2]

Portfolio context and risks

Business development companies raise capital from public investors and use it to finance smaller and middle-market businesses, often through loans that banks may not make. Their earnings can benefit from higher interest rates, but credit losses, borrower concentration and leverage can quickly reduce distributions and reported net asset value.^[1][2][3]

MFIC's portfolio includes meaningful software exposure, an area investors have scrutinized after a long technology-deal boom. Ares argues that greater diversification will strengthen the combined company; investors will still need to assess nonaccruals, valuation marks, borrowing costs and whether projected earnings accretion survives a weaker credit cycle.^[1][2][3]