Key Takeaways
- • Ares Capital will acquire MidCap Financial Investment Corporation (MFIC) from Apollo Global Management in a deal valued at $2.6 billion ($3.7 billion including, per the source, the broader transaction figure cited).
- • MFIC shareholders will receive $1.21 per share in cash plus about $9.67 per share in Ares Capital stock under the merger agreement.
- • The consideration represents a 30% premium to MFIC's share price but a 15% discount to its net asset value as of September 30.
- • Apollo will retain ownership of the fund's parent company, MidCap Financial.
- • MFIC will pay all undistributed income to shareholders via a special dividend before closing, with that amount deducted from the final equity payment.
Summary
Ares Capital has agreed to acquire MidCap Financial Investment Corporation (MFIC), a private credit fund, from Apollo Global Management in a transaction the source values at USD2.6 billion ($3.7 billion). Under the merger agreement, MFIC shareholders will receive USD1.21 per share in cash and about USD9.67 per share in Ares Capital stock.
The headline price represents a 30% premium to MFIC's prevailing share price, but a 15% discount to the fund's net asset value as of September 30, according to the source. Prior to the Ares deal, MFIC shares had traded near a 40% discount to net asset value, which the Wall Street Journal attributed to the fund's mediocre performance.
The transaction comes amid broader turmoil in private credit, where managers including Apollo have been selling underperforming funds this year, according to Bloomberg. Apollo had put MFIC up for sale earlier in the year after a selloff in its shares as investors grew concerned about rising defaults.
Under the terms of the deal, MFIC plans to distribute all undistributed income to shareholders through a special dividend before the transaction closes. The value of that dividend will be deducted from the final equity payment to shareholders. Apollo will retain ownership of the fund's parent company, MidCap Financial.
The headline price represents a 30% premium to MFIC's prevailing share price, but a 15% discount to the fund's net asset value as of September 30, according to the source. Prior to the Ares deal, MFIC shares had traded near a 40% discount to net asset value, which the Wall Street Journal attributed to the fund's mediocre performance.
The transaction comes amid broader turmoil in private credit, where managers including Apollo have been selling underperforming funds this year, according to Bloomberg. Apollo had put MFIC up for sale earlier in the year after a selloff in its shares as investors grew concerned about rising defaults.
Under the terms of the deal, MFIC plans to distribute all undistributed income to shareholders through a special dividend before the transaction closes. The value of that dividend will be deducted from the final equity payment to shareholders. Apollo will retain ownership of the fund's parent company, MidCap Financial.
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