Ares is buying Apollo’s $2.6 Billion lending vehicle

Ares Capital Corporation (NASDAQ: ARCC) has agreed to acquire MidCap Financial Investment Corporation (NASDAQ: MFIC), the listed business development company managed by an Apollo affiliate, in a cash-and-stock deal with an enterprise value of about $2.6 billion. The deal was announced on 27 October alongside Ares Capital's third-quarter results and is expected to close in the first half of 2027.

The terms

MFIC shareholders will receive $10.88 per share: $1.21 in cash and $9.67 in Ares Capital stock. That is a 30.1% premium to MFIC's 26 October close and 25.8% above its 30-day volume-weighted average price. A special dividend of undistributed taxable income is expected at closing, with the stock component reduced dollar-for-dollar to offset it.

A premium to price, a discount to book

The headline premium is measured against a depressed share price. Against book value, the picture reverses: $10.88 is roughly 15% below MFIC's preliminary net asset value of $12.86 per share at 30 September. Ares Capital is buying a senior secured loan book for about 85 cents on the dollar of stated NAV.

That gap is the deal. A BDC trading below NAV generally cannot issue new shares below book without shareholder approval, which caps its growth and leaves holders sitting on a discount with no obvious catalyst to close it. A buyer with scale and a stronger currency can offer those holders an exit above market while still paying less than book.

Who funds the cash

The $1.21 cash component is not paid by Ares Capital. It comes from a subsidiary of Ares Management (NYSE: ARES), the BDC's external manager. The manager earns fees on a larger asset base once the deal closes, so it is paying part of the price for growth it will be compensated for. For Ares Capital shareholders, the premium is partly subsidised by the firm that profits from the expansion.

Why scale matters now

Ares Capital ended the third quarter with a $29.2 billion portfolio across 636 companies, already the largest among public BDCs. The combined company would hold more than $31 billion across more than 800 borrowers.

The earnings line explains the timing. Third-quarter core EPS was $0.46, down from $0.50 a year earlier and below the $0.48 quarterly dividend. Management expects the deal to be modestly accretive to core EPS and supportive of future dividends. Buying an income-producing senior secured portfolio below book is one of the faster ways to close a gap between earnings and payout.

Consolidation is the trade

This is familiar ground for Ares Capital, which previously absorbed Allied Capital and American Capital. What is new is the queue behind MFIC: BlackRock TCP Capital, Investcorp's BDC and WhiteHorse Finance have all said they are weighing strategic options.

For allocators, the signal is that the public BDC market is splitting in two: platforms with the scale and cost of capital to buy, and sub-scale vehicles whose best outcome is to be bought. Judging by this deal, the price of that outcome is a premium to market and a discount to book.

Key figures

Sources

• Bloomberg, "Ares Capital to Buy Apollo's MidCap BDC in $2.6 Billion Deal", 27 Oct 2026
• Alternative Credit Investor, "Ares Capital to acquire MidCap Financial from Apollo for $2.6bn", 27 Oct 2026
• PE Insights, "Ares Capital agrees $2.6bn deal for Apollo-managed MidCap Financial", 27 Oct 2026
• The Motley Fool, "Ares Capital is Making a $2.6 Billion Acquisition", 27 Oct 2026
• Finimize, "Ares Capital Is Buying Apollo's MidCap In A $2.6 Billion Deal", 27 Oct 2026
• Citybiz, "Ares Capital to Acquire MidCap Financial Investment in $2.6 Billion Deal", 27 Oct 2026