In 2018 the champion pacer Lazarus was purchased from its NZ-based owners by the renowned US thoroughbred stud Taylor Made Farms for $4 million.
The next year the NSW Harness Racing Club, which trades as Club Menangle, paid $2.875 million to purchase the southern hemisphere rights to the stallion.
It was, and remains, a most unusual transaction, for no race club in Australia in any code of racing had ever embarked on a high-risk breeding venture before.
Club Menangle announced that its members would recoup their investment in Lazarus in just 3 years.
These are the maths.
Lazarus stood in its first season for $10 000 a service.
200 mares were booked in.
200 x $10 000 = $2 million
$2 million x 3 years = $6 million.
That means that Club Menangle were getting half of the fees, and someone else – Yirribee Stud which was gifted the stallion to stand without a commercial tender, or Taylor Made Stallions, or a combination of both – is getting the other half.
It all sounded great. Most things do in the conception. But there is a problem, a rather large one indeed for a business investment whose sole worth is his ability to impregnate well-bred mares in the hope they will drop foals who will win Group races.
Lazarus has fertility problems.
Put simply, in his first Austrian season season at stud, Laz fired blanks.
No-one except Club Menangle and Yirribee Stud know exactly how many mares fell in foal to Lazarus in the 2019 breeding year, but given that the duo would certainly have been shouting the figures from the rooftop if they were high, and they haven’t, we can only assume that the numbers are low, very low indeed.
Club Menangle have reduced Lazarus’ stallion fee to $8 000 for this, his second season.
Breeder who used Lazarus last year can return again for a reduced fee of $6000.
Lets do some blue sky sums.
We will assume Lazarus gets a book of 200 mares (he won’t), and that half went to him last year too.
100 x $8000 = $800 000
100 x $600 = $600 000
$800k + $400k = $1.4 million
Remember $6 million is Club Menangle’s break even point.
Now the club won’t recoup its investment for 4.5 years, not the mooted 3.
But wait! There’s more!
Citing the coronavirus as their excuse – rather than the truth, which is widespread breeder reluctance to send their top mares to Lazarus and miss, thus foregoing the ability to earn any money from the mare for a whole season – Club Menangle have offered up a special deal to the breeders.
Pay $2000 upon the result of a 40-day positive pregnancy test, and pay nothing more until September 2021, interest free.
Suddenly Club Menangle haven’t just moved into the breeding industry, it has become a money lender too, and not a real good one at that.
Gerry Harvey offers 15 months interest free, but he loads the cost into the prices of the goods he sells at Harvey Norman, and into application and service fees.
Club Menangle is doing the opposite – it is heavily discounting the sale item (a service by Lazarus), and charging no fees at all.
Lets do the sums again (and remember this is blue sky dreaming – Lazarus isn’t getting a book of 200 mares, and the likelihood of him impregnating any more than half of them is extremely remote).
200 x $2 000 = $400 000
That’s a long way short of the $2 million a year in service fee income Club Menangle requires to meet their promise of paying off the club members near $3 million that it paid for the breeding rights, isn’t it?
It gets worse.
Obviously the club will incur administration costs and expenses in the process of managing the outstanding fee money. It will also lose the interest on the $1 million it would have banked if it had charged the original fee. That foregone sum, based on the club’s reported investment return is about $60 – $70 000 a year.
This deal is starting to look like a scrambled egg isn’t it? And beginning to smell strongly like sulphur.
That’s just the tip of the iceberg.
No breeder in their right mind will send their most valuable mares to a stallion that has a high percentage risk of shooting blanks. These breeders will want to sit back and see if Lazarus really has resolved his fertility problems (highly unlikely), so this season they will send their best class girls to Sweet Lou or Captain Treacherous, or Bettors or Miki, or anyone other than Lazarus.
What they will do is take advantage of the reduced service fee, and the ridiculously generous deferred payment terms, to send their lower grade mares to be serviced by the stallion. These are the mares that would usually go to a sire in the $2000 – $4000 service fee range, which is a mix of bread and butter type proven stallions and emerging young sires who are being priced competitively to give them a fair crack.
This is not a maybe. It will happen, and it will have two calamitous effects.
The first is that even if Lazarus does come back from the dead and return brilliant fertility rates, the foals he is siring will be of a much lower quality than a top-class former racehorse of his calibre and purchase price should be siring.
Of course there might be freaks, but the general rule of breeding is that an average quality mare from an average family is unlikely to produce anything better than an average quality pacer on the track.
What that means is there is a much lower statistical probability that Lazarus’ sons and daughters will not win Group or feature age races, and if this is this is (as likely) the case, demand for his services as a sire will drop like a brick thrown out a 76th story window.