Beef Merger in Big Leagues

Houston Business Journal – Bob McClaren steered the careers of many young baseball players through the ranks during his lengthy stint as an executive and now as a consultant to the Houston Astros.

The former Astros president of business operations and current team board member and consultant says the same methodology can be applied to 44 Farms, his fast-growing business where four-legged performers are measured by a different type of quality standard.

Earlier this month, McClaren’s Houston-based Angus beef cattle breeding operation put the finishing touches on a deal to acquire rival Ankony Farms, based in Clarkesville, Georgia.

The transaction doubles the bovine assets at 44 Farms, and creates a newly merged entity dubbed 44 Ankony Farms.

The primary purpose of pursuing such a large acquisition was to place the 44 Farms brand on one specific top-quality herd owned by Ankony in North Platte, Neb.

Says McClaren: “We had always admired that herd, so we just chased it down. This business is all about setting yourself apart from the competition by the quality of your herd, and ultimately the tenderness of the meat that creates a great eating experience for consumers.”

Beef blood lines

McClaren’s family has operated 44 Farms since 1909, when it was run by his great-grandfather Sherwood McClaren.

Ankony has a similar long-standing heritage in the Angus beef business. The company founded in 1935 by New York businessman Allan Ryan, former chairman of the Royal Typewriter Co., was acquired in 1975 by Armand Hammer, founder of Los Angeles-based Occidental Petroleum Corp.

McClaren, CEO of 44 Farms, and Virgil Lovell, Ankony CEO, will serve as joint chief executives of the newly formed 44 Ankony Farms. Lovell took over Ankony from Hammer after his death in 1990.

McClaren stepped down as Astros president in 2001 after seven years in the front office to focus on 44 Farms. The ranch operation in Cameron, northeast of Austin, ran only 70 head of cattle when McClaren hit the acquisition trail in 2003.

Roping in Ankony almost doubled the 44 Farms herd size to 3,200 head of registered Angus beef and bulks up the company into a $9 million business. McClaren expects to thin his herds a bit while working through the merger.

McClaren might be talking about both in discussing his reasons for withdrawing from baseball to concentrate on beef.

“The company had its ups and downs over the years, and had started to get focused in other directions, with corn and hay crops,” he says. “I had that vision about five years ago to get back into the Angus business again.”

Jim Shirley, vice president of industry relations for the American Angus Association, says mergers involving cattle companies of this size are not the norm in an industry that focuses on creating efficiencies by decreasing herd size while maintaining existing levels of production.

The Angus brand of beef cattle is by far the dominant type of animal used for domestic beef production, with 348,000 head of breeding cattle registered in 2007.

Angus operations such as 44 Farms do not sell to meat producers. Their animals are the best of the best with proven genetic lines used strictly for breeding purposes by commercial cattle farmers who in turn sell animals for slaughter.

Breeding basic business

Shirley and McClaren agree the industry has changed dramatically in the past 30 years due to high-tech agricultural advances focusing on the breeding and reproduction of cattle.

But the basic order of business has remained the same. When the prize-winning cattle are in the mood for love, McClaren’s employees get down to work.

The company has three revenue streams: Selling bull semen for artificial insemination, arranging embryo transplants that allow other cows to give birth to top-notch specimens, and selling animals for breeding.

Top-quality females with the right ancestry can bring in as much as $800,000 apiece, while bulls can fetch as much as $100,000.

A couple of bulls in the 44 Ankony Farms fold are prominent in the 2008 industry rankings known as the Dollar Beef Index. “Ambush 28″ ranks No. 1 nationwide for proven Angus sires. “Future Direction” ranks No. 1 for young Angus sires, as well as No. 1 in marbling.

Such accolades trickle down to the commercial herd operations around the country as well, boosting prices for animals sent to slaughter that are connected to those blood-lines.

“People would be surprised, but the industry uses things like DNA testing to ensure that the offspring are top-quality animals with the ability to put on muscle and produce meat with the desired kind of (fat) marbling and the tenderness of the product,” says McClaren.

He finds similarities between his two favorite things, baseball and beef, noting young Angus cattle work on moving up from the minor leagues by staying in condition to become a star breeder one day.

Says McClaren: “You feed them, you train them, and some of them that are willing to work make it to the majors.”