Blue Leaf, a New PEF Manager, Scores Consecutive Buyout Deals... Thanks to a Powerful Backer?

Blue Leaf Equity Partners (Blue Leaf), a fledgling private equity fund (PEF) manager now in its second year, is rapidly building a track record, having closed two buyout (management acquisition) deals within just six months. The firm’s relationship with SIMPAC, the Korea Federation of Mid-sized Businesses' chair company, is drawing attention as SIMPAC has participated as a limited partner (LP) in each major transaction. In the market, there are differing views: some see SIMPAC as an aggressive strategic investor (SI), while others question whether Blue Leaf is essentially acting as SIMPAC’s 'OEM fund' due to their special relationship through family ties.

According to the investment banking (IB) industry on April 27, SIMPAC recently filed a disclosure stating that it invested KRW 35.4 billion in Geno Value-Up Private Equity Limited Partnership, acquiring a 46.89% stake in the company. SIMPAC explained that the purpose of the acquisition was "investment returns through PEF investment." This company is a project fund established by Blue Leaf to acquire Geno Energy, an industrial primary battery manufacturer. As the project fund’s total capital commitment amounts to KRW 75.5 billion, SIMPAC is responsible for nearly half of the fund’s capital, participating as the anchor LP. As a result, some say that without SIMPAC, it would have been difficult for this deal to succeed. Blue Leaf plans to acquire Geno Energy for approximately KRW 110 billion, with about half of the acquisition cost to be covered by the project fund and other sources.

This is the second time SIMPAC has participated as a Blue Leaf LP. In July last year, SIMPAC invested KRW 13 billion in Blue Leaf Mobility Scale-Up Private Equity Limited Partnership. This was Blue Leaf’s first project fund since its establishment, and through this fund, Blue Leaf made its maiden investment by acquiring KRW 40 billion worth of redeemable convertible preferred shares (RCPS) in KORENS, an auto parts manufacturer. Blue Leaf subsequently succeeded in acquiring management control of Marine Tech, a ship parts company, at the end of last year.

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There is an opinion that SIMPAC’s successive deals with the new fund manager reflect its aggressive moves as a strategic investor (SI). SIMPAC is Korea’s leading hydraulic press company, but its main business has not performed well. SIMPAC’s consolidated operating profit margin for the press division was 9.26% in 2024, up from 7% in 2023, but fell to 3.6% last year. In contrast, the auto parts business, which has emerged as a new growth driver since the acquisition of KDA (now SIMPAC KDA) from Skylake Equity Partners in 2024, has consistently maintained an operating profit margin in the 11% range. Blue Leaf’s acquisition of KORENS RCPS was an investment with a view to expanding into new business, and the latest investment is regarded as a stepping stone for entering the energy sector. To this end, SIMPAC has mobilized significant cash reserves. The KRW 35.4 billion investment represents 5.28% of SIMPAC’s equity and is equivalent to a quarter of its cash holdings (KRW 191.4 billion).

On the other hand, there are critical views suggesting that SIMPAC may be using Blue Leaf as an OEM fund. An OEM fund refers to one operated solely according to LP preferences. The Capital Markets Act prohibits investors from giving specific asset management directions to the fund manager. Put simply, there is speculation that SIMPAC may have used Blue Leaf to facilitate a future acquisition of Geno Energy. Through this investment, SIMPAC has secured a call option on Geno Energy’s issued shares. Since the exercise price is fixed, if Blue Leaf increases the company’s value in the future, SIMPAC could acquire it at a bargain price. Given SIMPAC’s sizeable investments from KORENS to the latest deal, if SIMPAC was responsible for all key decisions from the outset, this could be problematic. The special relationship through family ties is also drawing scrutiny: Blue Leaf CEO Joo Junha is the eldest son of People Power Party lawmaker Joo Ho-young. CEO Joo is the son-in-law of SIMPAC Chairman Choi Jinsik, having married Choi’s daughter, Choi Minyoung, who serves as SIMPAC’s Head of Management Division.

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