• MidCap will manage about $7 billion after acquisition
  • Apollo targeting $20 billion for the strategy by 2019

Apollo Global Management LLC’s middle-market lending unit will double in size by acquiring $3.6 billion in loans managed by GE Capital and Abu Dhabi’s Mubadala Development Co.

Apollo’s MidCap Financial, which managed $3.3 billion as of June, agreed to buy Mubadala GE Capital’s portfolio of corporate and real estate loans in the U.S. and Europe, according to a statement Wednesday. MidCap expects the transaction to be completed in the fourth quarter.

MidCap, unveiled by New York-based Apollo in February, is part of the alternative-asset manager’s push further into credit. Directly originating loans is the best expansion opportunity for Apollo’s credit business, co-founder Marc Rowan said at the firm’s investor day in December. The strategy, which when leveraged targets annualized returns of about 15 percent, could grow to manage more than $20 billion by 2019 and more than $40 billion in the future, he said.

“We expect the platform to continue to scale in the face of diminished traditional bank lending activity,” Apollo Chief Executive Officer Leon Black said in February, when the company created MidCap with initial assets from a health care-focused lending firm.

GE Moves

Apollo managed $162.5 billion as of June 30, with 69 percent in credit assets. The firm is using MidCap to make senior secured and asset-backed loans to mid-size companies, as well as to offer flexible credit lines called revolvers and to finance acquisitions backed by other private equity firms.

For General Electric Co., the sale of Mubadala GE Capital is the latest in a series of divestitures as CEO Jeff Immelt breaks off about $200 billion of financial assets and steers GE back to its industrial roots. Since announcing a plan in April to sell the bulk of GE Capital, the company has unloaded divisions including its U.S. buyout-lending unit to Canada’s largest pension fund manager and an online bank to Goldman Sachs Group Inc.

GE and Mubadala, an investment vehicle owned by the Abu Dhabi government, created the 50-50 joint venture in 2009. Perella Weinberg Partners advised Apollo on the acquisition.

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