Ares Capital (ARCC.US) to acquire MidCap Financial (MFIC.US) for $2.6 billion, adding another deal to the private credit "distressed bottom-fishing wave"

Ares Capital Corp. (ARCC.US) announced that it has agreed to acquire private credit fund MidCap Financial Investment Corp. (MFIC.US) from Apollo Global Management Inc. in a cash-and-stock deal valued at $2.6 billion in enterprise value. The two companies said in a statement on Tuesday that under the terms of the transaction, MFIC shareholders will receive $10.88 per share, consisting of approximately $1.21 in cash and $9.67 in Ares Capital common stock. The price represents a premium of about 30% to MFIC's closing price on Monday. Since the start of the year, private credit managers have been seeking to sell underperforming funds amid broader market turmoil and investor redemptions, while attracting competitors to snap up assets at bargain prices in the $1.8 trillion market. Publicly listed funds including BlackRock Inc.'s TCP Capital Corp., WhiteHorse Finance Inc. and Investcorp Credit Management BDC Inc. have said they are weighing strategic options that could include a sale, according to prior reports. MFIC is a publicly listed business development company (BDC). As of publication, its shares were up more than 20%, while Ares Capital edged slightly higher. For Apollo, the sale of MFIC is a strategic retreat from a "legacy asset." MidCap Financial was originally a direct lending platform acquired by Apollo in 2013, with MFIC serving as its publicly listed vehicle, formerly named Apollo Investment Corporation. But the vehicle has been bleeding in recent years: its default rate jumped from 3.9% at the end of 2025 to 5.3% in the first quarter of 2026, it posted a net loss of $61 million in that quarter, and its shares have long traded at a substantial discount to net asset value (NAV). For Ares Capital, the appeal of the deal lies in "buying cheap assets with strong currency." Ares Capital is the world's largest publicly listed BDC, and its parent Ares Management has approximately $484 billion in assets under management, with its credit platform itself being one of the largest originators of self-originated loans in the U.S. middle-market direct lending sector. Using its own stock as the primary consideration means Ares is using the market's valuation of its platform to exchange for an asset pool trading at a discount.