Ares Capital Corp. said Monday it will buy Allied Capital Corp., which finances middle-market company buyouts, in an all-stock deal worth $648 million.

The deal gives shareholders of Ares Capital, a New York affiliate of Los Angeles investment management firm Ares Management LLC, a 65 percent stake of the combined company. Shareholders of Allied, which has been selling assets to pay down debt, will own the remaining 35 percent.

The acquisition values Allied’s stock at $3.47 per share, a 27 percent premium over the company’s Friday closing price. About 58.3 million Ares shares will be issued in exchange for more than 179 million Allied shares.

The companies expect the deal to close in the first quarter of next year. Both boards have approved the acquisition, which also needs the approval of shareholders and lenders.

Ares Capital invests primarily in first- and second-lien loans and mezzanine debt, sometimes with an equity component. Allied Capital invests in long-term debt and equity capital.

“This transformative transaction creates a middle-market capital provider with leading market coverage, access to capital, scale and diversification,” Michael Arougheti, president of Ares Capital, said in a statement.

Shares of Ares Capital shares closed up $1.30, or 12 percent, to $11.99 on the Nasdaq.