American Capital bought by Ares Capital for $3.4bn

May 23, 2016, 12:18 PM EDT
(Source: 401(K) 2012/flickr)
(Source: 401(K) 2012/flickr)

Ares Capital will buy American Capital for $3.4 billion.

Reuters reports:

Ares Capital Corp (ARCC.O), an investment company focused on mid-sized firms, is buying smaller rival American Capital Ltd (ACAS.O) in a cash-and-stock deal valued at $3.4 billion to better fill the credit gap created as big banks turn cautious. The deal, which does not include American Capital's mortgage management unit, comes about five months after the Bethesda, Maryland-based company said it would solicit offers. American Capital has been under fire from activist investor Elliott Management Corp for its performance and its plan to spin off some assets into a business development company (BDC). Ares Capital said on Monday that it offered $6.41 per share and 0.483 of its share for each share of American Capital. American Capital Mortgage Management LLC will be sold separately to American Capital Agency Corp (AGNC.O) for $562 million. "The growing demand for capital from middle market borrowers has created the need for flexible capital providers like us to fill the financing gap as banks continue to retrench from the market," Ares Capital co-Chairman Michael Arougheti said.

Bloomberg notes:

The combined company of Ares Capital and American Capital would manage more than $13 billion at March 31 valuations, the companies said. Ares Management, which is providing $275 million of the acquisition price, said it expects to earn more in management and performance fees as Ares Capital’s fee-earning assets increase, though it will waive as much as $100 million in performance fees over 2 1/2 years. Ares Management, based in Los Angeles, managed $93.5 billion in credit assets, private equity holdings and real estate as of March 31. The firm, led by CEO Tony Ressler, went public in 2014, joining peers such as Apollo Global Management LLC and Carlyle Group LP in holding initial public offerings. Those firms, too, as well as many private credit investors such as Canyon Partners, are increasingly filling a lending void left by banks that are hampered by new regulations. U.S. legislation such as the Volcker Rule and the Dodd-Frank Act, as well as European reforms by the Basel Committee on Banking Supervision, have prohibited banks from certain investment activities and heightened their capital requirements.