Non-GAAP EPS of $0.46 fell short of expectations by $0.02, while revenue of $763 million fell short by $13.12 million
This marks the third consecutive quarter in which costs have not been covered by the dividend. In previous quarters, the shortfall was 0.01 cents; now it has risen to 0.02 cents.
Nevertheless, the dividend will remain at 0.48 cents.
Ares Capital has agreed to acquire MidCap Financial $MFIC (+0.45%) .
This will further diversify and expand Ares Capital’s investment portfolio, which is already the largest among publicly traded BDCs.
The merger will create an even larger BDC (Business Development Company). Ares Capital closed the third quarter with an industry-leading investment portfolio of $29.2 billion across 636 portfolio companies. The acquisition of MidCap will expand the portfolio to over $31 billion across more than 800 portfolio companies. This increased scale and diversification will help lower the risk profile and strengthen resilience.
$ARES (+0.59%)
Ares Management
is financing a portion of the purchase price directly.
MFIC shareholders will receive $10.88 per share, consisting of approximately $1.21 in cash and approximately $9.67 in shares of Ares Capital. This represents a 30.1% premium to MFIC’s closing price on October 26 and a 25.8% premium to the volume-weighted average price over the past 30 days. However, the price is about 15% below MFIC’s preliminary net asset value of $12.86 per share as of September 30.
The cash portion comes from Ares Management and not from the BDC itself. According to Ares Capital’s latest quarterly report, its investment advisor, Ares Capital Management, is participating in the merger agreement—in part to finance the cash payment—and is acting in its own name.