- Ares Capital agreed to buy MidCap Financial Investment Corp. from Apollo Global Management in a cash-and-stock deal with an enterprise value of $2.6 billion. MFIC holders will receive $10.88 a share, made up of about $1.21 in cash and $9.67 in Ares Capital stock, so the cash portion is only about 11% of the price (Lumida calculation).
- The offer is about 30% above MFIC’s Monday close, which implies a prior price of roughly $8.37 a share (Lumida calculation). MFIC shares rose 18% in early New York trading, while Ares Capital fell 2.6%.
- Private credit managers have been looking to sell underperforming funds this year amid market turmoil and investor redemptions, drawing competitors hunting for cheap deals in the $1.8 trillion market. Publicly traded BDCs including BlackRock’s TCP Capital, WhiteHorse Finance and Investcorp Credit Management BDC have said they are weighing strategic options, which could include a sale.
- The deal shows the largest BDC managers using their scale to absorb smaller rivals while valuations are depressed. Paying mostly in stock lets Ares Capital grow without spending much cash, though its share drop shows investors are weighing the cost.
What Happened?
Ares Capital said Tuesday it agreed to acquire MidCap Financial Investment Corp., a publicly traded business development company managed by Apollo, in a deal with an enterprise value of $2.6 billion. Shareholders of MFIC will receive about $1.21 in cash and $9.67 in Ares Capital common stock for each share, or $10.88 in total. The price represents a premium of about 30% to MFIC’s closing price on Monday.
Why It Matters?
The transaction is a sign that consolidation is arriving in the listed private credit market after a year of redemptions and pressure on underperforming funds. Buyers with strong balance sheets can pick up portfolios at a discount, while sellers get an exit for investors stuck in shares trading below value. The gap between MFIC’s 18% jump and the 30% headline premium suggests the market is pricing in some deal or stock-price risk.
What’s Next?
Investors will watch whether other BDCs exploring options, such as TCP Capital, WhiteHorse Finance and Investcorp Credit Management BDC, find buyers on similar terms. The path to closing this deal will also be watched. More consolidation could reshape the BDC sector around a small group of the largest managers.
Affected Tickers and Coins: ARCC, MFIC, APO
Source: Bloomberg
