King Ranch, Inc. Business Information, Profile, and History

Company Perspectives:

With its striking history and ongoing success, King Ranch has made the transition from frontier ranch to modern corporation. Its situation is clearly unique: it is one of the largest privately held corporations in the United States--whose Home Ranches are designated a National Historic Landmark.

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 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-19th 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. Although it is perhaps most famous for its agribusiness segment (cattle breeding; horse breeding; farming; citrus groves; commodity marketing and processing; commercial hunting leases), King Ranch also oversees retail operations including luggage and leather goods, farm equipment, commercial printing, and tourism. 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. King Ranch celebrated its 150th anniversary in 2003.

Early History in the 1800s

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 kinenos (King's men), have formed the core of the King Ranch workforce 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, more than 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.

Beginning of the Kleberg Family Reign in the 1880s

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 more than 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 15 years of the 20th 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 U.S. 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 more than 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.

Expansion and Innovation in the 1940s-50s

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 with the hope 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.

Diversification: 1990s and Beyond

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. In 1993, the company formed and acquired a 50 percent interest in Running W Citrus Limited Partnership, a subsidiary created to oversee 16,000 acres of Coca-Cola's Minute Maid Citrus Groves in South Florida. The King Ranch Saddle Shop, once exclusively a supplier of cowboy gear for the kinenos, went into the retail clothing and luggage business. Parts of King Ranch's property were opened not only to hunters--who since 1979 were able to 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 continued to graze King Ranch's sprawling acreage and the company remained a major force in the cattle industry, King Ranch evolved into a distinct agribusiness and energy corporation during the 1990s. Both in the cattle business and in its other pursuits, the management and shareholders of King Ranch expressed a commitment to the kind of experimentation and innovation that helped the company to thrive for so many years. Tio Kleberg commented on the company's diversification in a 1995 U.S. News & World Report: "We no longer see ourselves in the cattle business, as such. We are in the resource-management business. And we all feel we have a lot of resources to manage."

Indeed, by the late 1990s King Ranch's portfolio was hugely diversified, ranging from oil to citrus to cattle. In 1998, the company merged its Running W Citrus operations with Collier Enterprises to form Consolidated Citrus Limited Partnership. As part of its strategy to build profit in its agriculture business, the newly created firm acquired the Turner Foods groves from Florida Power & Light. The deal catapulted Consolidated Citrus into the upper echelon of citrus producers and secured King Ranch's position as the largest citrus grower in the United States.

King Ranch remained focused on its oil holdings as well and in 1999 spun off its King Ranch Energy Inc. subsidiary just before its merger with St. Mary Land and Exploration Co. The merger--structured as a stock swap worth $53 million between King Ranch and St. Mary shareholders--included properties in the Gulf of Mexico and the onshore Gulf Coast.

The company entered the new millennium preparing to celebrate its 150th anniversary in 2003. Over the course of the previous decade, the company had successfully overcome falling demand for beef by diversifying into new growth areas and selling off its international properties in order to focus on its domestic operations. While King Ranch remained a powerful entity in the business world, a new thorn threatened to shadow its anniversary celebration. A lawsuit was brought against the company by the descendants of Major William W. Chapman, a business partner of Richard King during the formation of the ranch in the 1850s. The descendants claimed that Robert Kleberg had worked for both Richard King and Chapman's widow during a land settlement issue, creating a distinct conflict of interest. The suit claimed that Kleberg deceived Chapman's widow, defrauding her out of control of the Rincon de Santa Gertrudis, a parcel of land equal to approximately 7,500 acres.

Although King Ranch management maintained that the suit had no merit, its legitimacy was upheld in appellate courts and went under review of the Texas Supreme Court. According to a 2003 New York Times article, "The ruling could set an important precedent for questioning the legitimacy of land titles secured in Texas in the 19th century, especially for Hispanic families who contend that land grants dating to the Spanish empire were taken over by white settlers through fraudulent methods." In August 2003, however, the Texas Supreme Court ruled against the Chapman descendants, arguing that there was not enough evidence to proceed with a trial. With the controversial lawsuit behind it, King Ranch went ahead with its anniversary festivities, which included a highly publicized cattle and horse charity auction.

King Ranch had made significant changes in its operations since the early 1990s and its business environment would no doubt continue to transform into the years to come as management looked to diversify into new profitable areas. Regardless of its future path, the King Ranch name and its Running W brand would surely continue as one of the most widely recognized identities in the industry.

Principal Competitors: AzTx Cattle Company; Cactus Feeders Inc.; Lykes Bros. Inc.

Chronology

• Key Dates:
• 1853: Captain Richard King starts up his ranch in an area known as the Wild Horse Desert.
• 1867: King begins using the Running W brand to mark his cattle.
• 1935: The Klebergs make King Ranch a corporation.
• 1940: The U.S. Department of Agriculture recognizes the Santa Gertrudis as the first ever American-produced beef brand.
• 1946: Assault wins horse racing's Triple Crown.
• 1952: International expansion begins.
• 1979: The company begins offering commercial hunting licenses on its property.
• 1993: The company expands its Florida farming operations with the purchase of citrus groves in the southern part of the state.
• 1999: St. Mary Land & Exploration Co. acquires King Ranch Energy Inc.
• 2003: King Ranch celebrates its 150th anniversary.