Key Takeaways
- • Ares Capital Corp., a public business-development company managed by Ares Management, is acquiring MidCap Financial Investment Corp. (MFIC), a roughly $2.5 billion fund previously managed by Apollo Global Management, according to people familiar with the matter cited by The Wall Street Journal.
- • The deal is structured as a mix of cash and stock from Ares Capital Corp., with MFIC shareholders expected to own about 5% of the combined fund if it closes as anticipated in the first half of 2027.
- • The merger lifts Ares Capital's total investments to over $31 billion from roughly $29 billion and adds about 200 new borrowers to its portfolio.
- • MFIC shares have traded at a nearly 40% discount to the net asset value Apollo ascribes to its loans, per CEF Advisors data, giving Ares an opening to acquire the loan book at a discount.
- • The transaction reflects Apollo's continued shedding of smaller publicly traded funds as it concentrates on investment-grade private debt originated for its insurer Athene.
Summary
A fund managed by Ares Management, one of the largest players in private credit, is buying MidCap Financial Investment Corp. (MFIC), a publicly traded business-development company with about $2.5 billion in assets, from Apollo Global Management, according to people familiar with the matter reported by The Wall Street Journal. Ares will acquire MFIC using a combination of cash and stock issued by its own public vehicle, Ares Capital Corp. Shareholders in MFIC are expected to own about 5% of the merged fund if the transaction closes as expected in the first half of 2027.
The deal follows years of subpar performance at MFIC, whose shares have traded at a nearly 40% discount to the net asset value Apollo assigns to the loans in the fund, per data from CEF Advisors. That valuation gap created an opening for Ares to acquire the loan portfolio at a discount. Ares Capital, at roughly $29 billion, is already one of the largest private-credit funds globally. Following the merger, its total investments will exceed $31 billion, and its portfolio will gain roughly 200 additional borrowers, improving diversification.
The transaction also reflects divergent strategic paths between the two managers, which share a history dating to 1997, when Ares spun out of Apollo. Apollo, which manages about $1 trillion, began as a private-equity manager and later built private-credit operations around its insurer Athene, a model many competitors have since copied. Ares, which manages about $670 billion, has focused largely on private corporate lending, with an expansion into private asset-backed debt. Apollo has been focused on originating investment-grade private debt for Athene and other insurers and has been shedding smaller publicly traded funds. In January, it restructured another underperforming real-estate investment trust by selling $9 billion of commercial-property mortgages to Athene.
The deal follows years of subpar performance at MFIC, whose shares have traded at a nearly 40% discount to the net asset value Apollo assigns to the loans in the fund, per data from CEF Advisors. That valuation gap created an opening for Ares to acquire the loan portfolio at a discount. Ares Capital, at roughly $29 billion, is already one of the largest private-credit funds globally. Following the merger, its total investments will exceed $31 billion, and its portfolio will gain roughly 200 additional borrowers, improving diversification.
The transaction also reflects divergent strategic paths between the two managers, which share a history dating to 1997, when Ares spun out of Apollo. Apollo, which manages about $1 trillion, began as a private-equity manager and later built private-credit operations around its insurer Athene, a model many competitors have since copied. Ares, which manages about $670 billion, has focused largely on private corporate lending, with an expansion into private asset-backed debt. Apollo has been focused on originating investment-grade private debt for Athene and other insurers and has been shedding smaller publicly traded funds. In January, it restructured another underperforming real-estate investment trust by selling $9 billion of commercial-property mortgages to Athene.
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