The Next Frontier
The state’s (and maybe the world’s) most famous 825,000 acres would seem to be on a collision course with the twenty-first century, when giant spreads are routinely chopped up, there’s no money to be made in cattle, and the younger generation frequently bolts the family business. But the heirs of Captain Richard King are smarter than that. They have skillfully avoided ruin and preserved their history by embracing the future.
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It is a fine, sunny mid-april morning in South Texas. The weather has been unusually cool and rainy, and the spacious, pool-table-flat wedge of land between the Nueces River and the Mexican border—which the Spanish once called El Desierto de los Muertos—today looks as green as Ireland. I am in a pickup, bouncing through a pasture on the 237,348-acre Norias division of the King Ranch, one of four massive chunks of land that make up the 825,000- acre (1,300-square-mile) spread. The truck belongs to Dave DeLaney, a rangy 51-year-old who runs the ranch’s cattle operation. With roughly 43,500 head, it is the nation’s largest. DeLaney is giving me the grand tour, which will ultimately take the better part of two days.
As a reporter, my presence here is highly unusual, to say the least. The King Ranch has always been a deeply private place, instinctively hostile to outsiders, a group that has included, over the decades, Comanches, border raiders, horse and cattle thieves, Union soldiers, government road builders, and nosy journalists. The fact that I am getting a multiday tour from a full-bird vice president like DeLaney is unheard of in recent times. As far as I can tell only a handful of reporters have ever been allowed full access to the ranch. Harper’s Magazine sent writers in 1892 and 1907; Fortune sent one in 1933; Time in 1947; and Texas Monthly in 1980 (in the fifties, artist and historian Tom Lea was invited to write the ranch’s only authorized history). By the grace of some inscrutable collective sentiment on the part of Captain Richard King’s heirs, I am the most recent member of this small, select company, here to try and make sense of a 154-year-old family business that has somehow managed to haul itself into the twenty-first century without being busted up, sold off, or sacrificed to commercial development. I am not sure why they have agreed to let me in, but the fact is, they have, and I am not arguing about it. I am keeping my eyes open.
What is most striking about the place, not surprisingly, is its tremendous scale—nearly unimaginable for those of us who live in places where real estate is calibrated in fractions of city blocks. The pasture we are in, for example, encompasses 30,000 acres—or 47 square miles. The live oak grove (or motte, as they call it here) we just drove through comprises 60,000 acres. And the land is not only vast. It is also beautiful. Though beauty is not a quality generally associated with South Texas, Norias is one of the loveliest pieces of coastal real estate I’ve ever seen, a place of swaying bluestem grasses; lush, wide-open coastal plain; rolling bone-white sand dunes; and rain-detonated explosions of daisies, coreopsis, and dayflowers. Animals are everywhere we look: scores of wild turkeys, some of them in mating dances; white-tailed deer and bobwhite quail in almost every meadow; ducks; javelinas; feral hogs; brilliantly colored scissor-tailed flycatchers; and red-winged blackbirds.
Beyond the size and beauty of the physical environment, there is the weight of history. The King Ranch was the first ranch in Texas, the cornerstone of the cattle business in the West, one of the originators of the great cattle drives to the Kansas railheads and later of the fenced pastures that killed the drives off. At the time of his death, in 1885, founder Richard King owned half a million acres and was the wealthiest man in Texas. His grandson Robert J. Kleberg Jr. built the business into a 15-million-acre global empire, with ranches spread from Argentina to Australia. Kleberg invented the Santa Gertrudis, the first American cattle breed and the first new breed anywhere in one hundred years; he bred the first registered American quarter horse and the Thoroughbred stallion Assault, which won the Triple Crown in 1946. If that wasn’t enough, Kleberg also invented the root plow and the cattle prod, eradicated Texas tick fever, and arranged the largest oil lease ever on private land.
All this history lives on, pervasive as the mesquite and huisache trees. I can feel it in the vast muscular land and see it in the glorious Main House, with its battlements, multichromatic terra-cotta tiles, Tiffany-designed furniture and art glass, Italian marble stairs, and teak floors. Drifting along the ranch’s two thousand miles of asphalt, caliche, and dirt roads, I can’t help feeling a certain sense of timelessness, as though nothing on this splendid Rhode Island—size ranch has really changed since the days when Captain King’s vaqueros rounded up tens of thousands of cattle for the northern trail drives.
But those are appearances only, mirages of the South Texas heat. The truth is that the King Ranch is not at all what it once was. As a business, it is profoundly and irreversibly changed from the time when Kleberg would receive potentates and movie stars on the Main House porch and sit like a Middle Eastern pasha in his reviewing stand, gazing at million-dollar horses. Fifty-six years of enlightened despotism had left the ranch singularly dependent on him, and when he died, in 1974, the machinery of empire immediately began to creak and then to fail. Battles of succession led to wars of secession. Family members forced the ranch to buy them out, causing it to incur massive debt; lawsuits followed, then the remaining heirs grabbed most of the oil royalties that had been floating the operation for forty years. Drained of most of its oil money, the business staggered forward under the burden of its archaic, nearly feudal cradle-to-grave welfare system for the hundreds of workers and their families who resided on the King Ranch. Had things gone only slightly differently, these forces might have easily led to the breakup of the King Ranch, as they have for thousands of other family-owned outfits.
But this did not happen. Instead came sweeping change, driven by an entirely new concept of the ranch. What Captain King founded was a simple cattle operation. Then it became a cattle and oil business. As the King Ranch struggled to survive, it came to be seen as a business, to be sure, but also as a legacy, something to be shielded, protected, and preserved. The result is that over the past quarter century its owners have, laboriously and at considerable risk, built an elaborate financial carapace around the 825,000 acres of the home ranches in South Texas. Ironically, in order to protect the four divisions of this acreage (Santa Gertrudis, Laureles, Norias, and Encino), the King Ranch has been forced to branch out into new enterprises that are antithetical to everything the ranch once held holy. The business is now built around commercial hunting leases, which let thousands of outsiders into the private kingdom, and farming, long considered by ranch folk as a pedestrian, second-class business and pointedly banned by Kleberg. With 36,000 acres of Florida citrus groves, the King Ranch is the leading citrus grower in America. It is also one of the nation’s ten-biggest sugarcane producers. It owns huge sod, cotton, and milo farms in Texas and Florida. Buffered from the cruel volatility of the markets, the ranch lives on, working cattle and sustaining its old romance. But today the King Ranch exists in the form of a large and diversified agribusiness conglomerate, carefully designed to prevent the sacred acres from ever being sold.
Along the way it has become something the previous generations could never have foreseen or imagined. “If Captain King sat down with us today, he’d say, ‘Well, how are things going?’ ” said Helen Kleberg Groves, known as Helenita, Kleberg’s only child and one of the matriarchs of the family. “And we’d say, ‘They are going fine. We don’t have that many cattle or horses anymore. It is hard to make any money at ranching. We’ve got hunting leases and citrus groves and sod and cane farms.’ He would think we had lost our minds.”
In fact, the changes of the past thirty years are not entirely unprecedented. For all of its sepia-toned majesty, the King Ranch was never a stranger to crushing debt or the threat of liquidation. You can think of its history as a chain of ingenious adaptations. Time and time again, gigantic and apparently intractable financial entanglements were somehow, miraculously, solved by the right people who showed up at just the right time. The first such crisis came in 1885, following the death of Captain King. The captain left his widow, Henrietta, half a million acres of land and half a million dollars of debt. This was a tremendous sum at the time. To make matters worse, only a few weeks after his death, the great cattle boom of the 1880’s collapsed. Right on its heels came one of the worst droughts of the century, culminating in the Great Die-up of 1891 and 1892.
Riding to the rescue was a buttoned-down lawyer and lifelong non-rancher named Robert J. Kleberg Sr., who had married Captain King’s daughter Alice in 1886 and was shortly thereafter put in charge of the ranch by Henrietta. Robert Kleberg Sr. sharpened his pencil and went to work, and his strict sense of economy likely saved the enterprise from ruin. In 1892, at the height of the drought, he took such extreme measures as shipping 12,000 head of cattle to the Indian territory to find grass. Despite Robert E. Lee’s famous injunction to his friend Captain King to “buy land and never sell,” Robert Kleberg Sr. sold small portions of the ranch here and there as needed. He had his Kineños—literally “King’s men,” the ranch’s cowboys—skin thousands of cattle that had starved and sell the hides. His relentless search for water finally paid off in 1899 in the form of gushing artesian wells that changed the destiny of the ranch. In the end, he not only paid the Captain’s debt but also managed to double the size of the ranch.
The ranch’s second crisis came in the years after Henrietta’s death, in 1925. That was also the year that Robert Kleberg Sr. suffered a stroke that left him partially paralyzed. By then, 29-year-old Robert Kleberg Jr., known to the family as Mr. Bob, had taken over the day-to-day affairs of the ranch (Robert Kleberg Sr.’s other son, Richard, known as Mr. Dick, would soon be elected to the first of seven terms in the U.S. House of Representatives). Again, the business found itself in debt, this time owing $1.5 million. But there were new complications: Massive estate taxes were owed, and there was the matter of settling up inheritances among the various children of Captain King’s heirs, which wasn’t going to be cheap either. It seemed, for a time, that the only way out would be to sell a large portion of the ranch, which was then roughly one million acres. At the darkest hour, faced with more than $3 million in debt and taxes owed, Mr. Bob arranged with Humble Oil what was then the biggest private oil lease in history. The 1933 contract paid the ranch one eighth of all the revenue from wells drilled on the property. The deal was simple and ingenious: In exchange for drilling rights, Humble would lend the King Ranch $3.5 million, which Mr. Bob would use to liquidate the debt. The oil royalties, which started flowing a few weeks before Hitler’s 1939 invasion of Poland caused the price of oil to spike, soon paid off the loan.
Henrietta’s death also triggered the divvying up of her estate, a complicated affair that took until 1935 to resolve. Of her five children, only Alice King Kleberg was still alive. The children of her son Richard King II got the 147,000-acre Santa Fe Ranch (also known as Norias West), along with lands in West Texas and other assets. Her other son, Robert King, had died at nineteen without heirs. The sole heir of her daughter Ella King Welton got a 161,895-acre portion of Norias East, which she sold to Alice. The heirs of her daughter Henrietta King Atwood received more of the Norias East acres; one of them sold her portion to Alice, while the other two fought what Tom Lea called “a rancorous and prolonged litigation” that was not concluded until 1950. Alice and her five children (Henrietta, Alice, Sarah, Mr. Dick, and Mr. Bob) inherited the core properties of the Santa Gertrudis and Laureles divisions, which, added to the Norias lands acquired from the other heirs, constitutes the bulk of what is known today as the King Ranch.
The roots of the ranch’s most recent crisis also lie in death: Mr. Bob’s passing in 1974 ended 56 years of autocratic control, seat-of-the-pants management, and medieval accounting systems. He had not just been the dominant rancher of his era but one of its most prominent figures. His jaunty, Stetson-framed face appeared on the cover of Time in 1947. He had lived a life entirely befitting the lord of the greatest cattle kingdom on earth. He circled the globe in his private jet, often in the company of strikingly beautiful young women (his beloved wife, Helen, died in 1963), visiting his ranches in Spain, Morocco, Australia, Venezuela, Brazil, Argentina, Florida, Kentucky, and Pennsylvania (his Cuban ranch was confiscated by Fidel Castro in 1960). Like his grandfather Captain King, he was both an indefatigable worker and a hard drinker, a man who liked his vintage Bordeaux, rare single-malt Scotches, and for breakfast, the occasional leche colorado, a combination of bourbon, milk, and honey. He kept a large suite at the Pierre Hotel, in New York, and often dined in the company of New York’s power elite at Club 21. He was one of the most successful Thoroughbred breeders in America and spent considerable time at the racetrack. At the ranch he entertained kings, presidents, and celebrities, from Will Rogers to Bing Crosby.
Such larger-than-life behavior was not always good for the ranch in South Texas. The terrible drought of the fifties wrought long-term disaster on its pastures, and Mr. Bob was often not around to address the mounting problems. By the seventies the home ranches were struggling to make money (at one point, in 1971, there were only 25,000 cattle on the four divisions), and the foreign and other domestic ranches, vast and impressive though they were, hardly contributed anything to the bottom line. Only Argentina and Australia shipped profits home. By the time of Mr. Bob’s death, in 1974, it was clear that the success of the King Ranch was in some ways an illusion. Its real money came from oil. Oil funded Mr. Bob’s foreign acquisitions and his expensive hobbies (his horses cost the ranch $1 million a year) and carried the home ranches through the drought years.
The worst problem was not so much scant cattle revenue as nonexistent management. “The minus in the system was that, from the middle 1950s onward, [Mr. Bob] traveled a great deal,” wrote longtime assistant John Cypher in his 1995 memoir, Bob Kleberg and the King Ranch: A Worldwide Sea of Grass. “When he was away from the ranch, except for work done by rote, things came to a standstill.” Even worse, at the time of his death, Mr. Bob had failed to make a clear plan of succession.
A few months after Mr. Bob died, a board meeting took place at the Main House to determine who would assume control of the ranch’s operations. The man Mr. Bob had always intended to succeed him, Mr. Dick’s only son, Richard M. Kleberg Jr., known as Mr. Richie, was sick with emphysema. That left the sons of Mr. Bob’s sister Sarah, Bobby Shelton and Belton “B” Kleberg Johnson, whom Mr. Bob had raised following their parents’ deaths. The family knew this was a critical decision, though they could not have foreseen how deep and immediate its effects would be. At the meeting Shelton and Johnson made passionate cases for why they should be elected to run the ranch, but they both ended up losing. The board instead chose the sons-in-law of Mr. Bob’s sister Henrietta. Jim Clement, a Princeton-educated Easterner who had married Henrietta’s daughter Ida, became the chairman, and John Armstrong, the son of another South Texas ranching family who had married Henrietta’s other daughter, Henrietta, was named president. Clement had worked for the ranch since 1947. No one wanted another Mr. Bob, and choosing competent managers who were not blood kin seemed the right thing to do.
It did not come without consequences. Having failed to win the top job, Johnson and Shelton asked to sell their shares and leave the ranch. Among the Kleberg heirs, this was an emotionally wrenching event. Until then, only one of them had ever sold out of the ranch. In 1954 Mr. Bob’s sister Alice Kleberg East, who preferred to ranch her own land rather than be part of a corporation, decided she wanted her share of the acres. Mr. Bob refused, as he would throughout his lifetime, to break up the home ranches. Instead, he engineered a brilliant three-way swap: In exchange for 10 percent of the King Ranch oil royalties, he bought the adjacent 147,000-acre Santa Fe Ranch from the heirs of Richard King II, who had inherited it as part of the 1935 settlement; then he swapped that land for his sister’s shares. (Though they no longer own the ranch, the Kings have prospered, in part due to the flow of oil lease money.)
But in 1977 there was no such easy solution. Though Shelton’s buyout was settled with land in Florida and other assets that did not directly affect the home ranches, Johnson received $70 million in cash. Following this, yet another disaffected stockholder, Mr. Dick’s daughter Alice Kleberg Reynolds, came forward to request a buyout for $35 million. (Shelton and Johnson both later sued for additional oil royalties.) The ranch did not have all that money. It had to borrow $100 million, which meant that, for the first time since 1933, the home ranches were mortgaged—to the hilt.
These buyouts and the debt they incurred were just the beginning of a crisis that would roll through the seventies and eighties. The departure of the three heirs had the unfortunate effect of sparking a shareholder revolt over the ranch’s oil money. The dissatisfaction was rooted in the ranch’s tangled financial history. Under the lease agreement with Humble Oil (later to become Exxon and then Exxon Mobil), 3,700 oil and gas wells have been drilled since 1939, and the majority of them produced. Initially, the royalty money the ranch received amounted to one eighth of the production of the wells. Then in 1958, in exchange for the right to build a natural gas plant on the property, Humble increased the ranch’s share to one sixth of production. Eleven years later, Fortune reported that the total oil and gas revenue from the King Ranch leases was $120 million, making the King Ranch’s share $20 million, or fifteen times what it made running cattle.
Given the volatile nature of the cattle business, this income meant security, a permanent hedge against droughts and market fluctuations. It also could have meant great wealth for the shareholders, but Mr. Bob was notoriously frugal. He plowed most of the surplus monies back into the ranching operations and paid out only modest dividends. No one went hungry, but considering the value of the drilling operation, they could all have been much richer.
After the major oil price increases of the OPEC-driven seventies, total revenue from the leases rose to $600 million, making the ranch’s share $100 million. That much money called attention to itself, and it did so with particular clarity in the days following the $105 million cash buyout of Johnson and Reynolds. Johnson, family members pointed out, had been able to turn his paper fortune into liquid wealth. Why couldn’t they do the same? Still chafing from years of Mr. Bob’s parsimoniousness, the family members now wanted the oil money they felt was theirs. The board voted to spin 75 percent of the royalties off directly, and permanently, to shareholders. In the peak years of the oil boom, this was a lot of money. It meant that the roughly thirty family owners were considerably richer than they had ever been before.
But this event, known to the family as “the mineral distribution,” had the simultaneous effect of diverting the ranch’s revenue stream, a fact that would not be fully appreciated until the price of oil crashed in the eighties. In an attempt to replace the lost revenues, the ranch borrowed additional millions to invest in a subsidiary, King Ranch Oil and Gas (later King Ranch Energy) that drilled wells, primarily in and around the Gulf of Mexico. This put the business further at risk. But despite its hardships, the plan worked. Giving stockholders access to this wealth was the simplest way to guarantee that they would not, like Johnson, Shelton, and Reynolds, soon be lining up to sell their shares.
For a variety of reasons—death, taxes, divorce, family squabbles, falling profits, changing markets, somebody’s drinking or gambling problem—most families lose their landed heritage by the fourth or fifth generation. One of the chief contributors to these dissolutions is the tendency, among later generations, to live farther and farther from the old home place. Over time, as the families of the King Ranch owners and heirs continued to grow exponentially, fewer and fewer were opting to live on the ranch. As the tumultuous seventies slipped into the perilous eighties, they were scattered across the country, though as many as half managed to keep a residence in San Antonio. They had other jobs, other lives, and visited the ranch only rarely. By this time the King-Kleberg heirs were, in every sense of the term, old money, among the oldest in a country where the first large industrial fortunes had not been established until the middle of the nineteenth century. They behaved like old money, traveling abroad and between various residences in the United States, sitting on boards, giving generously to charities, and sending their children east to expensive, elite private boarding schools and leading private colleges. (Helenita attended Foxcroft boarding school, in Virginia, and later commuted by air from Kingsville to Vassar College, in New York’s Hudson Valley, sometimes by private aircraft.) Like old money, too, the King-Kleberg heirs were quiet about their wealth: Theirs was not a culture of Ferraris and nightclubs and high living.
But they no longer spent any significant time in Kingsville, the town founded by Robert Kleberg Sr. and Alice King Kleberg a few miles from the ranch headquarters. If you weren’t helping to run the place, then why put up with remote living in one of the hottest parts of North America, which also happened to be a cultural desert? The only family members who lived on the ranch anymore were Clement, Armstrong, and Mr. Dick’s grandson Stephen “Tio” Kleberg, the vice president in charge of the cattle outfit and agricultural enterprises. Another vice president, the husband of Mr. Dick’s daughter Katherine, William B. “Dub” Yarborough, looked after the oil business from Midland.
Alongside the three businessmen Tio stood out. Many saw him as the last great patrón. He was a superb rider and an old-fashioned hands-on ranch manager who was often in the saddle from dawn to dusk, a man who could draw you a map of every pasture on the property and whose handlebar mustache suggested an iconic bond with the days of Captain King. Under his direction, the ranch replaced most of its homebred Santa Gertrudis cattle, for which it was world famous, with a hardy, well-marbled breed known as Santa Cruz—a composite of Santa Gertrudis (50 percent), Gelbvieh (25 percent), and Red Angus (25 percent).
But neither Tio nor any of the other ranch managers wielded the power Mr. Bob had, and the Kleberg diaspora was left to face the problem of how to pay off the $100 million debt without a strong decision-making autocrat. “When the minerals were spun out, it made it that much tougher on the business,” Tio told me.
“The numbers were huge,” agreed his wife, Janell, who worked for the ranch for many years in various capacities, including helping, on horseback, with roundups. “For an agricultural company to pay off that kind of debt was going to be very, very difficult.”
In order to survive, the King Ranch had to be restructured from top to bottom according to modern management principles. Unprofitable businesses had to be sold off, costs had to be cut. The most obvious and painful place to start was the ranch’s birth-to-death social welfare system. It had been in place since the 1850’s and had been modeled on similar paternalistic practices in seventeenth-century Mexican haciendas. Looking back, it seems almost impossible that such an archaic system could have survived in America into the 1980’s. The families of more than five hundred workers had lived in houses on the four divisions. Rent was free, as were utilities. Education was taken care of by schools maintained by the ranch on three of the four divisions. As part of their salary, workers got a monthly ration of beef, milk, flour, and other sundries for their families. When they retired, they just stayed in place.
“It was just the old way of doing things,” Tio explained. “We had no retirement plan. Literally, the retirement plan was, a guy would come to the house and tell Dad [Mr. Richie] that he was ready to retire. And Dad would say, ‘Here’s $125,’ and you’d get your milk and meat and a ration, everything you needed. If you were sick, you went to the foreman, and he wrote you a little order of paper that said you could go down to the Kingsville clinic and get your health care. That was it. There wasn’t any co-pay.”
The huge expense was just part of the problem. The federal government now had wage guidelines and laws about documentation and child labor (sons of Kineños had apprenticed with their fathers in the saddle, going back more than a hundred years). The distasteful job of downsizing the system, and of getting rid of large numbers of faithful employees, fell mainly to Clement and Tio.
“It was the toughest thing I have ever had to do,” Tio said. “We had what we called a voluntary early retirement.” They offered cash payouts and in a few years were able to reduce the staff by some 60 percent. In place of the old patrón system there are now updated and quite generous health and retirement plans. The company offers both matching funds for a 401(k) and a pension—a “defined benefit” increasingly rare among smaller companies. For active workers the houses are still free. The population, which fifty years ago hovered around 1,200, is now down to 300, of whom only 45 are cowboys (compared with more than 400 in the old days). Many of the houses on the ranch are unoccupied; many more have been torn down.
The other obvious targets for cost cutting were the foreign ranches. They had never been popular with most shareholders, mainly because they did not produce much income. “With a large segment of the family selling out in short order, the debt that came with that and the plunge in energy prices, those international properties were logical candidates for liquidation,” said Clement. “A lot of people in the family regarded it as less than optimal diversification.” Nor was there much emotion attached to them. So one by one the non-Texas properties were sold off: Venezuela and Argentina in 1986, Pennsylvania in 1987, Spain and Australia in 1989, Morocco in 1990. The Kentucky horse farm went in 1999. Because of foreign exchange problems, the huge Brazilian ranch, first put on the market in the early eighties, was not sold until 2001. When it was all over, the sole remaining piece of Mr. Bob’s old worldwide empire of grass, other than the home ranches, was a 20,000-acre parcel in southern Florida.
All this hard work soon bore fruit: The company’s cost cuts and streamlining allowed it to pay off its debt in 1985; the sale of its foreign properties enabled it to sink resources back into the cattle business and refocus its operations in Texas. The whipsawing, recessionary eighties, however, had left their mark. Many family members saw, for the first time, how fragile their legacy really was, how easily threatened.
“We ended up witnessing a financial disaster in Texas in the eighties,” said Mr. Bob’s grandson and current board member John Alexander, whose career has been mainly in the oil business and who lives in San Antonio. “There were all of these business reversals for lots of people in Texas, and it made everybody acutely aware of how many unknown factors can come into play. There was this tremendous, unanticipated reversal and a lot of sad stories, and all of that influenced our thinking. One of those sad stories, quite frankly, was Bobby Shelton, who sold out of the ranch and was running hard to do a lot of things he thought would make him very successful. He had a nice asset base to start with, and very sadly, by the time he died, quite young, it was gone.”
Then there was the example of B Johnson, who had a career as a prominent businessman in Texas after his buyout but spent the rest of his life in the thrall of the King Ranch. (“All he could do was look over his shoulder to Kingsville,” his first wife, Patsy, told the San Antonio Express-News.) “It was painful for us all to watch the way it was handled by the three parties,” said Tio, referring to the three who sold out in 1977. “I think there were some lessons. When you look at the underlying question—what do you really want out of it?—I can tell you this: B was not any happier the day he got out than the day he died. He was very unhappy. Money is not the answer. That would be the lesson. You have to be happy with yourself and what you are doing.”
By the late eighties, it was apparent that a fundamental change had taken place in the family’s relationship to the ranch. The more physically detached the generations became from the life in Kingsville, the more they seemed, paradoxically, to value their legacy. “After we got the oil distribution and stopped trying to get the last drop of blood out of the cows,” said Helenita, “people started to see what a wonderful place they had.” The proof is that Johnson, Shelton, and Reynolds remain the last shareholders to sell out. Together, the King-Kleberg heirs are sitting on an asset with a breakup value of at least $1.5 billion. Even divided among a large family, that is a great deal of money. Yet not a single family member has asked to get out.
As a direct consequence of the renewed feeling for its legacy, the family decided that, in an economy that was proving deadly for family ranches, they needed professional managers. Outsiders. In 1988, as Clement and Armstrong were retiring, the shareholders took the radical step of hiring as chairman and president a man named Darwin Smith, the CEO of consumer paper products company Kimberly-Clark. The ranch soon got to see what the downside of letting outsiders in looked like. Smith, unquestionably one of the most brilliant and successful CEOs of his time (and of an old-line family company too), did not last a year. One of the matters he tried to take up was usage of the Main House. Though no family members had lived there since the sixties, to most of them it remained the ranch asset with the most sentimental value. In 1989, partly in response to an IRS case review into outdated business practices, such as loose record-keeping involving the separation of family and company rec-ords, Smith set new rules for the house. From then on it would be treated like a hotel; family members had to reserve it and had to pay for it. The new rules extended to other services too. A matriarch like Ida Larkin Clement had to lease her house on the ranch and pay to have the lawn cut; Tio, who lived in his father’s house, also had to make lease payments. So sensitive was the issue of the Main House that it was directly responsible for Smith’s abrupt departure. As a litmus test of the family’s confidence, Smith had proposed that he be trusted with a full $2.5 million renovation of the house; when the family balked, he left.
His successor as president, Roger Jarvis, who had run the ranch’s oil exploration company, did marginally better. He lasted five years, then resigned under pressure. (Following Smith’s tenure, the positions of president and chairman were separated; Leroy Denman Jr., a prominent San Antonio lawyer, served as chairman from 1989 to 1995, followed by Abe Zaleznik, a Harvard Business School professor with a specialty in family business, from 1995 to 2000.)
Finally, after seven years of searching and experimenting, the King-Kleberg heirs found the manager they were looking for, someone who embodied, in his childhood, education, working life, and worldview, everything that they, by broad consensus, wanted the King Ranch to be. His name was Jack Hunt. His most obvious qualification was a degree from the Harvard Business School. On first meeting, he would not necessarily strike you as the ideal heir to such hard-drinking, hard-riding, saddle-back legends as Richard King and Bob Kleberg. He looks a bit like a friendly uncle—bespectacled, of less than average height, and quiet and reserved except for a dry sense of humor that finds its way periodically to a loud laugh. You can imagine him enjoying a glass of wine with his wife; it is much harder to imagine him shivering in a cow camp on the Laureles division in 30-degree weather.
But Hunt, as it turns out, has more in common with the Kleberg clan than you might think. The son of a career Navy man, he grew up partly in Texas. At the age of twelve, he started working summers near Amarillo on ranches owned by his great-uncle. He loved the experience, and he worked there until he was in his twenties, riding, roping, branding, doing roundups and maintenance. He somehow found his way from Texas to elite Williams College, in western Massachusetts; served in the Navy; then attended Harvard. The most telling part of his background comes next: With his newly minted Harvard MBA, he went to Houston to work for a feedlot company.
I met the 62-year-old Hunt in April at the high-rise building two miles north of the Galleria in Houston where the King Ranch has had its headquarters since 2001. I was struck, as anyone would have been, by the contrast between the rowdy photographs of the ranch that covered his walls and the cool, abstracted corporate air of the place where he worked. He was, he told me, a bit nervous about being interviewed.
I asked him how many people in his class at Harvard Business School had gone to work for a feedlot. “Well, not a lot, certainly,” he replied with a small laugh. But the business suited Hunt. He advanced quickly and was soon managing several ranches and feedlots near Amarillo. He later became CEO of the 270,000-acre Tejon Ranch, in California, whose main business was cattle ranching but whose products included almonds, walnuts, pistachios, and wine grapes. His life, it struck me, seemed to have been perfectly scripted to prepare him for running the King Ranch: a childhood and adolescence on horseback, brilliant academic and ranching credentials, and, like the family, a disinclination to be flashy about his many successes.
Hunt came to the company during a time of accelerating change. Eighteen months before he arrived, the King Ranch had made its first foray into citrus production when it bought Minute Maid’s orange groves. In 1999 it merged these groves with those of another big orange grower, Collier; acquired a small citrus company, Via Tropical; and formed Consolidated Citrus, the largest citrus grower in the country, with 50,000 acres under cultivation. Hunt’s most notable deal happened in 2002, when the King Ranch bought out Collier. It was the company’s biggest acquisition to date, and even more impressive, Hunt had sold the family on it. Today, the King Ranch owns 36,000 acres and is still the country’s largest grower. Its citrus groves employ 284 full-time workers—more than twice the number who work for the home ranches. Though the King Ranch will not share financial figures with the press or public, family members and management alike insist that the orange groves have been extremely profitable investments.
Hunt moved aggressively in other directions too, partly deploying capital freed up from the liquidation of all those foreign ranches. Since 2000 the King Ranch has become a major player in the sod business, buying up three farms in Navasota, Wharton, and Gonzales. In 2006 it bought the Young Pecan Shelling Company, of Las Cruces, New Mexico, the second-largest pecan processor in the world. These nonranching operations are in addition to what existed before Hunt arrived: 3,700 acres of sod in Florida, 12,000 acres of Florida sugarcane farms (which made the King Ranch one of the largest shareholders in the co-op that controls Domino Sugar), and 60,000 acres of cotton and milo that had been grown on the Laureles division since the late eighties. Hunt also steadily expanded the King Ranch mail-order catalog, through which it sells clothing, furniture, leather goods, and other consumer items. The catalog alone now employs 25 people in Kingsville. (For many years, the King Ranch has also owned a small publishing company and Robstown Hardware, a John Deere dealership.) Today, the entire company employs 809 people, 470 of them in farming operations. Not surprisingly, requests to peruse the books were denied, but my own rough estimates put the ranch’s revenues in the $200 million to $300 million range, of which no more than 10 percent comes from cattle.
As these agricultural revenues grew, the oil business became less and less important. According to Hunt, King Ranch Energy was a relatively small company, and it was not competitive, given the tremendous costs of offshore exploration. The King Ranch was turning into an agribusiness conglomerate, and the oil and gas business no longer fit. “It became clear to the board and to me that we were not going to be able to grow in the area that we were strongest, which was agriculture, as long as we had these tremendous capital requirements,” said Hunt. His solution: Spin King Ranch Energy out to a larger, publicly traded company called St. Mary Land and Exploration and let the family owners have the full proceeds in the form of St. Mary stock. It was a way, again, of turning paper into liquid wealth.
This stock distribution netted the family some $53 million, but not all the changes Hunt brought to the King Ranch were so happily received. In 1998 he clashed with Tio over the hiring of consultants and other issues (chronicled in detail in “When We Were Kings,” August 1998). The battle was engaged, and Tio lost; the board, including some family members, supported Hunt. Tio resigned his position as vice president and took a position on the board, which he occupies today. His departure meant that, for the first time in the King Ranch’s 145-year history, no descendant of Richard King’s would be part of the day-to-day management of the company. It was no exaggeration to say this marked the end of an era.
Tio and Hunt have since reconciled—and indeed work closely together as board member and CEO—though clearly neither has forgotten what happened. Hunt acknowledges that it was a difficult time but insists that it was a transition that had to be made. “It is never easy to make changes in an organization,” he said circumspectly. “We felt we needed to add some depth generally throughout the company, and this was part of that process. The good thing about it was that we retained Tio at the board level and got the benefit of his knowledge and experience. It really sort of freed up the company to do some of the things we have been doing.”
“I would do it the same way today,” Tio told me. “We had a real disagreement, and I haven’t changed my opinion about it.” But he was quick to add that he thinks the board and managers are doing “a terrific job.” Interestingly, for all their publicized differences, Tio and Hunt have fundamentally similar views on the ranch business. It was Tio who had pushed hard in the early days for farming and later for expanded hunting leases, both of which would dominate the Hunt era.
Their relationship has also come to symbolize the new, smoother working relations between management and the board. In the late eighties, when the first outsiders had been let in, there had been considerable and often unpleasant debate about their role in the family business. “The one thing we could always agree on,” said 62-year-old Sally Kleberg, Tio’s sister, “was that the historic King Ranch in Texas should never be sold or broken up. Whatever else it was, we would just try to work out our differences.” A decade later, the ranch had settled on a balance: 100 percent outside management and a family chairman. Today, the board has eight members. Three are from the family: chairman Jamey Clement (the son of previous chairman Jim Clement, he succeeded Zaleznik), John Alexander (Mr. Bob’s grandson), and Tio. They represent the three branches of the family: descendants of, respectively, Henrietta Kleberg, Mr. Bob, and Mr. Dick, the three grandchildren of Captain King who did not sell out. Then there are four blue-chip outside directors: former Secretary of State James A. Baker; Dallas oilman Ray Hunt; William Gayden, the chairman of Dallas-based Merit Energy; and Stuart Janney, the chairman of the Bessemer Group.
Both the family and its outside managers and directors are committed to making the company grow. This is not something, it should be noted, that can be done over the long haul on a farm or ranch, which represents a fixed acreage with a limited rate of production. You can get only so many oranges from a tree or plant, so much sod in a field. So that means diversification and acquisitions, lots of them, which is what the future of the King Ranch is all about. “We had to move from a personal to an institutional basis, where the important thing is not the people but the systems,” said 51-year-old Caroline Alexander Forgason, one of Mr. Bob’s granddaughters. “I think we have done that. It has been very difficult, very painful. Very tough. But in order for the coming generations to experience it and maintain it, we have had to do that.”
If owning shares of a large-scale commercial agribusiness, as opposed to an old-fashioned cattle ranch, struck some King-Kleberg heirs as unfamiliar ground, they were quick to adapt to the new reality. A far more controversial pursuit was the selling of hunting leases on the home ranches to companies and wealthy individuals. In the seventies there had been two corporate leases on the little-used Encino division, but there was no precedent for letting outsiders in to build hunting lodges and roam the sacred acres with hundreds or even thousands of their friends, shooting the King Ranch deer, quail, turkeys, and hogs. The fact that the ranch was large enough to accommodate this did not matter: To most of the family, this was like letting strangers camp in your living room.
The heirs were being asked to allow this intrusion because of simple economics: Hunting is a considerably more profitable business than ranching. The going rate for cattle leases is $2 to $3 an acre; wildlife leases range from $12 to $15 an acre. This is a truth that ranches all over Texas have had to come to grips with in the past 25 years. But it still caused a dustup in Kingsville. “There was a real emotional uproar about commercializing hunting,” said Sally Kleberg. “Getting the family to go along was extremely difficult.”
Leasing dictated an entirely different approach to the land. The ranch had spent a great deal of money over the years eradicating brush, mostly invasive mesquite and huisache. With hunting and wildlife as a priority, however, brush habitat became as important as tall grass. This meant that the cattle operation had to shrink, and shrink it did. At its peak, in 1925, the King Ranch was home to 95,000 cows. That number has dwindled to 43,500. Due to its new land-management priorities, the ranch will never again run the kinds of herds it once did.
Instead, the King Ranch is today one of the premier game areas in North America. Many people consider it the best white-tailed deer and bobwhite quail hunting, period. No high fences here, just unbroken, horizon-spanning stretches of open land that are thick with free-range game, the product of decades of strict conservation. Though it has only recently opened its gates to commercial hunting, the King Ranch was a pioneer in wildlife habitat and conservation, establishing strict game limits for family members as early as 1912. It was among the first large American ranches to hire a full-time wildlife biologist to track animal populations, and it was an initiator of the practice of converting water wells and stock tanks for wildlife use. (Even away from Kingsville, the family played a role in land stewardship: In 1934 Mr. Dick was the chief sponsor of a House bill that required waterfowl hunters to buy a permit, or stamp, the proceeds from which went to protect wetlands; for seventy years, the Duck Stamp, as it is known, has been a tremendously successful conservation tool, funding most of the country’s 545 national wildlife refuges.)
The result of this approach to conservation was a ranch that was always rich in wildlife, and in that the family came to see value. South Texas is one of the most biologically diverse regions of the world. In a time of runaway urbanization, declining rangelands, and endlessly sprawling chains of 5-acre ranchettes, the home ranches represented an uncommonly well-protected, and uncommonly big, refuge. Biologists refer to the King Ranch, and the adjacent 500,000-acre Kenedy and 300,000-acre East properties, as the region’s “last great habitat.” Today, the King Ranch’s 44 hunting leases cover 500,000 acres. Though it does not make public its rates for hunting leases, they generate significantly more in net profits than all the cattle operations combined.
If, like me, your idea of a hunting lease is a travel trailer in the middle of nowhere with a handful of camo-clad guys drinking beer and cleaning their rifles, the camps on the King Ranch will likely surprise you. Take the lease belonging to San Antonio Caterpillar dealer Holt Cat (the owner, Peter Holt, who also owns the San Antonio Spurs, is the great-nephew of William Knox Holt, the man who, with Bob Kleberg and Howard Murphy, invented the root plow to clear mesquite). Holt Cat’s lease consists of 34,000 acres, 150 miles of roads, an impeccably appointed twelve-bedroom hunting lodge with the usual assortment of dead animals on the walls, assorted outbuildings, high and low skeet houses, a rifle range, ten hunting vehicles, and a dog kennel. The lease employs eight people full-time, including a manager, a chef, three dog handlers, two guides, and a wildlife biologist. Think of it as a fine hotel, specializing in hunting, nestled in the mesquite and huisache groves on the Santa Gertrudis division. It hosts one thousand people every year.
What is most interesting about the lease is not its grandeur, however, but its unusual partnership with the ranch. The lessee, for example, is responsible for upholding the ranch’s extremely strict and finely calibrated hunting limits. There are forty full-time wildlife biologists on the King Ranch, all paid for by lessees. The Holt Cat biologist, Nathan Ballard, takes part in annual surveys of his lease’s acres. Each hunt is closely guided: Guests are allowed to shoot only certain kinds of deer and certain sexes and ages of various animals. Every week, data on all hunts and kills, with descriptions of the animals taken, is fed back into the King Ranch database. Holt Cat is expected to harvest 50 bucks and 100 does this year, while the number of deer taken on the entire ranch will be between 2,500 and 3,000. “A few other ranches in South Texas have programs like this,” said Mickey Hellickson, the King Ranch’s chief wildlife biologist, “but no one does it on this scale combined with this intensity.”
The partnership does not end there. Roughly one third of the lessees are also responsible for helping to maintain a strict grasslands-to-brushlands ratio, which means chaining, root plowing, and burning mesquite brush and then disk-plowing hundreds of miles of fifteen-foot-wide lanes. This is a battle that has been going on since brush began encroaching on Captain King’s oceanic expanses of grass in the late 1800’s (horses and cattle eat the mesquite pods, then scatter the seeds in dung over wide distances). The goal is to achieve a balance, roughly 65 percent grass and 35 percent brush. All this supplemental responsibility costs money too, somewhere between an additional $1 and $3 per acre. It is interesting to note that, though the number of cowboys on the ranch has declined considerably, the number of biologists, hunting and fishing guides, and dog handlers has more than compensated for it—an employment shift that tells you a good deal about the changes in the business and economy of Kingsville.
All four divisions of the ranch are subjected to constant and careful scrutiny, from management of turkey and feral hog populations to selective plantings of native grasses. In addition to this, there is the ongoing work of two other King Ranch offshoots, the Caesar Kleberg Wildlife Research Institute and the King Ranch Institute for Ranch Management at Texas A&M’s Kingsville campus. Both conduct extensive studies of the ranch and its balance of cattle and wildlife, including studies of individual species. The Caesar Kleberg Institute, for example, has recently done work on bobwhite quail, white-tailed deer, wild turkeys, nilgai antelope, and rare ferruginous pygmy owls (most of which live on or near the ranch). The result of all this—and the presence of dozens of wildlife biologists feeding weekly data into ranch headquarters—is that the King Ranch acres constitute perhaps the most closely monitored large piece of land in the country.
Which may account for the battle now being waged by the ranch over a proposal by the trusts and foundations that own the adjacent Kenedy Ranch for two waves of construction that would put up more than 400 windmills on its coastal sections in the coming years. The King Ranch has long been famous for fighting what it considers incursions on its land: It fought the location of U.S. 77, the building of a naval bombing range, the dredging of the Laguna Madre to make the Gulf Intracoastal Waterway (it won the bombing range battle and succeeded in preventing the dumping of dredge spoil on the King Ranch land but lost the highway fight). The family’s new cause célèbre is the windmill proposal, which the state of Texas and the Kenedy trusts view as environmentally responsible and the King-Kleberg heirs view as something close to an assault on the land. “In the biggest sense it is just a massive change in land use,” said Jack Hunt, who, along with Jamey Clement, has been an outspoken opponent of the wind farms. “The land will never be the same. Everywhere there is going to be a turbine, there are going to be thousands of tons of concrete and steel in the ground. The problem is that there is no permit required to build these things, no environmental studies, no requirements to remove them later on. The fact is that nobody really knows what they do or what effect they have on birds or other wildlife.” The King Ranch, therefore, wants laws that will make builders of wind turbines get permits, but it is facing enormous resistance from all quarters. As Texas land commissioner Jerry Patterson recently told the Austin American-Statesman: “This is the King Ranch versus the rest of Texas.”
In June the family gathered at the ranch for its annual “summer camp” and shareholders’ meeting. The activities take place over the course of a week and are the spiritual pivot of the ranch. They convey the notion of ownership of a large, iconic American ranch in a palpably real way. Almost all the owners and families come. Family members and employees compete in a rodeo; kids participate in calf riding and goat roping. There are nature tours and hunting and fishing excursions and historical seminars and splendid meals in the Main House dining room or in the pool house. This year the kids went out on photographic expeditions and assembled a natural science museum of sorts with cow skulls and other artifacts. In the midst of all the fun is business: the annual shareholders’ meeting where family members can air their views on the business of running the ranch. Outsiders are not allowed near the place. I asked.
Who exactly are these folks? While there are far too many to profile, they seem to share, as a group, certain attributes. They are, without exception, wealthy. They are highly educated and value both professional and advanced degrees, and they seem to prefer work to leisure, even though many are financially independent. “The majority of us work,” said Chris Kleberg, Tio’s son. “That is part of our legacy and heritage. Captain King was a hardworking man. The subsequent owners had the same mentality and work ethic.” Said Janell Kleberg: “There is a sense that you need to be out there doing something. Look at Tio’s first cousin [Rich Sugden, the largest single shareholder]. He is a good example of somebody who did not have to do anything. He is a family-practice doctor in a town in Wyoming and has delivered several thousand babies.” If there is one pursuit that is common to the majority of the heirs, it would seem to be horses, from basic show riding to Thoroughbred and cutting horse breeding—perhaps as a way of keeping in touch with the old days in Kingsville they never experienced.
This year the news is mostly good: Profits are strong, cattle prices are up, the acquisitions in the past few years of Young Pecan, Consolidated Citrus, and several sod farms are working out well. There is the inevitable talk about what the ranch will do next (possibly buy some pecan groves, maybe increase sod production), considerable anger over the Kenedy Ranch’s wind farm plan, and some worry over the bacterial disease called greening that is spreading in the Florida orange groves.
But another concern lurks in the conversations too. The King Ranch’s success in re-inventing itself since Mr. Bob’s death 33 years ago has come with a caveat: There is no guarantee that the next generation will want what its forebears have built. The big, transformative changes were made by the fourth and fifth generations, who continue to hold the majority of the voting shares of stock. (The King Ranch has two classes of stock, voting and nonvoting. The parents tend to hold most of the voting stock until they die.) The sixth generation, whose members range in age from about fifteen to forty, will come to power in the next quarter century. There are fifty or sixty of them—not a single rancher among them. Unlike the members of the fifth generation, they don’t even have parents who spent their childhoods on the ranch (Tio’s three children are the exception to this). Chairman Jamey Clement is so concerned with strengthening their ties to the ranch that he has been organizing field trips. “We have been trying to think of ways to engage them with the idea of what the ranch is and what it does,” he said, “so we pick a weekend in the fall and try to educate them about different things.” There have been trips to the ranch and trips to Florida to see the orange groves and the cane and sod farms.
It is far too early to tell if Clement’s plan will work. A few years ago the ranch started to offer summer “internships” for younger family members—the opportunity to go down to the ranch and learn how to ride and rope and do other useful work around cattle and horses. Aside from Tio’s kids, the five or six boys and girls, ranging in ages from 12 to 22, who have taken part in the internship are the first family members in that age range to have worked on the ranch in twenty years or more. These are encouraging signs, though it is interesting to consider what Captain King might have thought of a ranch internship.
“The pendulum has swung,” said Clement. “We were a family-owned and -operated business. We went to a family-owned and professionally managed business. But that doesn’t mean we can’t have family participation.” For the family company that has remade itself from top to bottom, this may suggest the most radical possibility of all: that one day, maybe, a lineal descendant of Richard King could once again rule the empire.