King Ranch, Inc. - Company Profile, Information, Business Description, History, Background Information on King Ranch, Inc.

10055 Grogan's Mill Road, Suite 100
The Woodlands, Texas 77380

History of King Ranch, Inc.

King Ranch, Inc. operates one of the largest and most famous cattle ranches in the world. The King Ranch itself, which covers about 825,000 acres--slightly larger than the state of Rhode Island--on four separate divisions of land in South Texas known as the "Home Ranches": Santa Gertrudis, Laureles, Norias, and Encino. The company represents a colorful part of Texas history. From its beginnings in the mid-nineteenth century as a family cattle ranch, the company has evolved into a major multinational operation active in a variety of agricultural and energy-related activities. While it is perhaps most famous for its agribusiness segment (cattle breeding; horse breeding; farming; commodity marketing and processing; commercial hunting leases), King Ranch also explores and develops oil and gas properties through its King Ranch Oil and Gas, Inc. subsidiary. Other businesses in which King Ranch is involved include residential real estate and a smattering of retail and commercial ventures near its Texas home turf. A private company, King Ranch is owned by 60 or so descendants of company founder Captain Richard King, a legendary figure in the history of cattle ranching in the United States.

Captain King started up his ranch in 1853 in an area known at the time as the Wild Horse Desert or the Nueces Strip, bounded by the Nueces River on the north and the Rio Grande on the south. A steamboat pilot by trade, King had arrived in southern Texas about eight years earlier to run a shipping operation on the Rio Grande with partner Mifflin Kenedy. On a trip through the Wild Horse Desert, King noticed a promising piece of land along the Santa Gertrudis Creek. He quickly formed a partnership with another friend, Texas Ranger Captain Legs Lewis. King purchased the land and he and Lewis launched the livestock operation that would eventually grow into the King Ranch.

In order to expand the ranch during its early years, King hired a lawyer to seek out the owners of the old land grants throughout the area. He then bought the parcels and annexed them to the ranch. King also began to buy and sell cattle in huge numbers. His buying trips frequently took him into Mexico. In 1854 King brought north not only all of the cattle from one particular Mexican village suffering through a drought, but all of the village's humans as well. These transplanted villagers went to work on the ranch. Their descendants, who became known as ki&ntilde-os (King's men), have formed the core of the King Ranch work force ever since.

The ranch managed to survive its early years in spite of a hostile environment created by the presence of bandits, unhappy Indians, and the usual assortment of rustlers, raiders, and ruffians associated with the Wild West. King split his time between his two businesses, steamboating and ranching, during this period. In 1858 King built the first ranch house at the Santa Gertrudis site on a spot suggested by his friend Robert E. Lee, a young Lieutenant Colonel at the time. During the Civil War, the ranch served as a depot for the export of southern cotton through Mexico, sidestepping the Union naval blockade. King and Kenedy also used their shipping enterprise to supply the Confederate army. By the end of the Civil War, thousands of head of cattle were roaming the ranch, which had grown to nearly 150,000 acres in size. In 1867 King began using the Running W brand to mark his cattle. The Running W eventually became one of the most widely recognized marks in the history of the cattle industry.

By the end of the 1860s, King Ranch longhorns were being sold in northern markets. In order for this to happen, the cattle had to be driven thousands of miles to railroad points as far away as St. Louis, and later, Abilene, Kansas. Between 1869 and 1884, over 100,000 head of cattle from King Ranch made the trip. Much of the livestock ended up in the Chicago stockyards; other destinations included new ranches springing up in Oklahoma, Nebraska, Colorado, Wyoming, and Montana, as the cattle industry of the West began to mature.

In 1884 a young lawyer named Robert Kleberg began handling the legal affairs of King Ranch. Kleberg quickly became an indispensable part of the ranch's operation. When King died in 1885, he left his entire estate to his wife, Henrietta. The ranch covered more than 600,000 acres by this time. Mrs. King, who outlived her husband by 40 years, made Kleberg the full-time manager of the ranch. Kleberg married King's daughter Alice the following year.

Under Kleberg's management, operations at the ranch were streamlined and made more efficient. Kleberg built fences to divide the sprawling ranch into more manageable units. He also began to cross his cowherd with Shorthorn and Hereford bulls, since the expansion of the railroad made the Longhorn's ability to walk long distances irrelevant. One by one, the problems of running a growing ranch were addressed. Annoying wild mustangs and donkeys were captured and shipped elsewhere. Crews were assigned to slow the encroachment of mesquite brush, which was quickly displacing the favorable "climax grasses." During the horrible drought years of the 1890s, Kleberg experimented with various ways of getting water to the land. Finally, in 1899, an artesian well was drilled. This well, originating over 500 feet below ground, provided enough water to support all of the region's livestock and agriculture. Along the way, the city of Kingsville was incorporated, following the vision of Henrietta King.

During the first fifteen years of the twentieth century, King Ranch managed once again to thrive in the face of further droughts, wars with Mexican raiders, and Kleberg's failing health. As Kleberg became weaker, he passed on responsibility for running the ranch to his sons, Bob and Dick Kleberg. Along the way, the ranch's selective breeding efforts intensified. They began crossbreeding Brahman bulls native to India with their own Shorthorn stock. The result was a new breed, which they dubbed "Santa Gertrudis." The Santa Gertrudis cattle combined the beefiness of the British Shorthorns with the Brahmans' ability to withstand the hot climate of summertime Texas. King Ranch began selling Santa Gertrudis bulls to other ranchers in the 1930s, and in 1940 the United States Department of Agriculture recognized Santa Gertrudis as the first ever American-produced beef breed.

Henrietta King died in 1925, at the age of 92. Mrs. King's death brought about a web of complications stemming from the division of her estate, high estate taxes, and various debts. The onset of the Depression, which caused beef prices to drop to the century's lowest levels, made matters even worse. Robert Kleberg died in 1932, signaling a complete generational shift in the ranch's management. By that time, King Ranch had grown to well over a million acres in size and was home to 94,000 head of cattle and 4,500 horses and mules, the quality of which had become very high through selective breeding.

When Mrs. King's estate was finally untangled, Kleberg's widow, Alice, and her children consolidated as much of the ranch as possible by purchasing the properties of other heirs. In 1935 the Klebergs made King Ranch a corporation so that its future as a single entity would be more secure. Estate taxes had left the ranch with a $3 million debt, however, and for the next few years the company struggled to remain afloat, with Bob Kleberg acting as manager of its day-to-day operations. To get the company back in the black, Kleberg turned to petroleum. He negotiated a long-term lease for oil and gas rights on the entire ranch with Humble Oil and Refining Company, which later became Exxon. Meanwhile, brother Dick served the company from the outside as president of the Texas and Southwestern Cattle Raisers Association and, beginning in 1931, as a seven-term member of the U.S. Congress.

Beef was not the only thing King Ranch was able to breed successfully. As the company developed its Santa Gertrudis cattle, it also engaged in the King Ranch Quarter Horse program. Bob Kleberg, the driving force behind the program, also became interested in thoroughbred racing horses. In 1938 he bought Kentucky Derby winner Bold Venture as a foundation sire for the ranch's thoroughbred breeding program. He also bought a stake in the Idle Hour Stable in Lexington, Kentucky, in 1946. That year, a King Ranch horse, Assault (a son of Bold Venture), won horse racing's Triple Crown.

During the 1940s and 1950s, a number of innovations improved production and kept King Ranch at the cutting edge of the cattle industry. These innovations included mechanized brush control methods, the identification of new and better grasses, and the development of better corrals for working cattle. Modern game management and preservation systems were also set up. In the 1950s the company went international. By 1952 the company was sending livestock to outposts in Cuba and Australia in hopes of boosting production by introducing Santa Gertrudis genes into the mix. In Australia, one of King's partners was Swift & Co., the biggest buyer of the ranch's U.S. beef output. The company eventually established a presence in Brazil, Argentina, and Venezuela, where the techniques developed to clear mesquite brush in Texas could be used on South American rain forest. Morocco and Spain soon followed as well.

Dick Kleberg died in 1955. His son, Dick Jr., had been playing an increasingly important role in company affairs since the 1940s, and in 1969 he was named chairman of the King Ranch board of directors. By the early 1970s, King Ranch controlled about 11.5 million acres of land worldwide. In 1974 Bob Kleberg died after managing the company's operations for more than half a century. The Kleberg family's choice to replace him as president and chief executive officer of the company was James H. Clement, the husband of Ida Larkin, one of Richard King's great-granddaughters (and Robert Kleberg Sr.'s granddaughters). In choosing Clement to lead King Ranch into the next generation, the family passed over Robert Shelton, a vice-president and King relative who had been raised by Bob Kleberg. This snub, combined with legal haggling over oil payments to family members, led to Shelton's departure from the company a few years later.

During the 1970s, Clement began to feel that the company had become unwieldy, and he started selling off chunks of King Ranch's overseas real estate. In 1976 Clement hired W.B. Yarborough to take control of King Ranch's oil and gas business. Yarborough, an independent petroleum operator and former Humble Oil geologist--not to mention the husband of Richard Kleberg Sr.'s daughter Katherine--decided to take on the task on a part-time basis. Four years later he became the first president of King Ranch Oil and Gas, Inc., a new wholly owned subsidiary formed to handle all of King Ranch's petroleum affairs.

Dick Kleberg Jr. died in 1979, and soon after that his son, Stephen "Tio" Kleberg, took over management of King Ranch South Texas, the company's core ranch operation. Under Tio Kleberg's guidance, the company continued to update its cattle, horse, and farming operations. More and more emphasis was placed on applying modern business principles to these tradition-bound endeavors. Meanwhile, as an outgrowth of the King Ranch Quarter Horse program, the company became involved in competition cutting--an arena event in which horses try to separate individual heifers from the herd--in the mid-1970s. Within a decade, through a combination of strategic horse purchases and the application of its fabulously successful breeding techniques, King Ranch had established a dynasty of champion cutting horses.

A management upheaval took place in 1987 when, within the span of half a year, Clement retired as president of King Ranch and Yarborough retired as president of the King Ranch Oil & Gas subsidiary. Clement was replaced by Kimberly-Clark CEO Darwin Smith, who became the first chief executive in company history with no familial ties to founder Richard King. Tio Kleberg continued to run the ranch's day-to-day operations. Smith's reign lasted only a year. After his departure, Roger Jarvis, who had been running the company's petroleum operations, was named president and CEO. Leroy Denman, a longtime company affiliate, was elected chairman of the board in 1990.

As the 1990s opened, King Ranch faced a number of questions. As income from both cattle and petroleum operations declined, the company was forced to look for other business areas in which to try its hand. In addition, the number of company shareholders had increased over the years through inheritances, and the very future of the ranch as a single entity was called into question. Although several King heirs wanted to break up and sell the ranch to turn a quick profit, the family decided to keep it intact.

Several new ways to generate revenue were found over the next few years. The company began actively exploring for oil and gas, rather than passively waiting for royalties on the oil and gas found on its property by others. Cotton farming was another area into which the company plunged with a fair amount of success. The King Ranch Saddle Shop, once exclusively a supplier of cowboy gear for the ki&ntilde-os, went into the retail clothing and luggage business. Parts of King Ranch's property were opened not only to hunters, who pay nearly $3 million a year to shoot at deer, turkeys, and other animals, but to tourists as well.

Another turnover in management took place in 1995. That year, Jack Hunt, formerly the CEO of California's Tejon Ranch, was named president and CEO of King Ranch. A couple months later, Abraham Zaleznik, a King Ranch director since 1988, replaced the retiring Denman as chairman of the board. By this time, the newer, nonagricultural businesses were accounting for more than half of the company's income, and Tio Kleberg was the only King descendant still actively working the ranch.

Although 60,000 head of cattle still graze King Ranch's sprawling acreage and the company remains a major force in the cattle industry, King Ranch has evolved into a distinct agribusiness and energy corporation. Both in the cattle business and in its other pursuits, the management and shareholders of King Ranch have expressed a commitment to the kind of experimentation and innovation that have helped the company thrive for so many years. The King Ranch name and its Running W brand, first used by Captain King 1869 when he became a sole proprietor, continue as one of the most widely recognized identities in the industry.

Principal Subsidiaries: King Ranch Holdings, Inc.; King Ranch Properties, Inc.; King Ranch do Brasil S.A. (Brazil); Big B Sugar Corp.; King Ranch Saddle Shop, Inc.; King Ranch Oil and Gas, Inc.; King Ranch Power Corp.; Kingsville Lumber Company; Robstown Hardware Company; Kingsville Publishing Company.

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Further Reference

"Biggest Ranch Jumps Some Oceans," Business Week, May 17, 1952, pp. 192--194.Cypher, John, Bob Kleberg and the King Ranch: A Worldwide Sea of Grass, Austin: Tex., 1995.Denhart, Robert Moorman, The King Ranch Quarter Horses, Norman, Oklahoma: University of Oklahoma Press, 1970."The Fabulous House of Kleberg: A World of Cattle and Grass," Fortune, June 1969.Godwyn, Frank, Life on the King Ranch, New York: Thomas Y. Crowell, 1951."King Ranch," Fortune, December 1193, pp. 48--61; 89--109."The King Ranch: The Last Frontier Empire Confronts the Modern World," Texas Monthly, October 1980, pp. 150--173, 234--278.Lea, Tom, The King Ranch, Boston: Little, Brown and Company, 1957McGraw, Dan, "A Fistful of Dollars," U.S. News & World Report, July 24, 1995, pp. 36--38.Nixon, Jay, Stewards of a Vision: A History of King Ranch, Houston: King Ranch, Inc., 1986.Paré, Terence, "New Chairman Tenderfoot Takes Over," Fortune, August 1, 1988, p. 217."Today's King Ranch," The Cattleman, September 1995, pp. 10--32.

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