Ademi LLP is examining whether Ares Capital’s proposed $2.6 billion acquisition of MidCap Financial Investment Corporation gives public shareholders fair value, adding scrutiny to a deal that still needs a shareholder vote.
Ares Capital Corporation and MidCap Financial Investment Corporation (MFIC) announced the transaction Oct. 27, after signing a merger agreement the previous day. At signing, the stated consideration was $10.88 per fully diluted share: $1.21 in cash from Ares Capital Management LLC and about $9.67 in Ares Capital common stock. The companies put the deal’s enterprise value at about $2.6 billion.
The stock exchange ratio will be calculated near closing using Ares Capital’s share price and net asset value per share. MFIC expects to distribute its remaining undistributed taxable income before closing. The stock consideration will be adjusted for qualifying tax dividends, but the special dividend’s amount has not been disclosed.
The companies said the consideration represents a 30.1% premium to MFIC’s Oct. 26 closing price and a 25.8% premium to its 30-day volume-weighted average price through that date. Management’s preliminary net asset value estimate was $12.86 per share as of Sept. 30. The estimate was not board-approved and had not been audited or reviewed; MFIC expects to report a final estimate with third-quarter results on Nov. 5.
Ademi said it is examining the deal price and board process, and questioned whether a $31.36 million termination fee could discourage competing offers. The merger agreement says MFIC may owe the fee in specified circumstances. It also allows MFIC to pursue a superior proposal before the shareholder vote, subject to conditions and a notice-and-negotiation process.
MFIC’s special committee unanimously recommended the transaction, and its board unanimously approved it. The committee received a fairness opinion from Moelis & Company, subject to the opinion’s assumptions and qualifications. Apollo affiliates that beneficially own 5.2% of MFIC’s outstanding common stock signed voting agreements supporting the deal.
Ares projected that its existing shareholders would own about 95% of the combined company and MFIC shareholders about 5%, excluding the special dividend. It also said the combination would expand its portfolio to more than 800 companies and more than $31 billion in investments at fair value, based on Sept. 30 figures.
MFIC shareholder approval and other conditions remain necessary, and the companies expect the deal to close in the first half of 2027. MFIC expects to report its final Sept. 30 net asset value estimate with third-quarter results on Nov. 5.
