Little did anyone know that the agreement would make the S&YR possibly the most profitable companies in the land. As the years passed, and without the S&YR having many overheads such as track or locomotive maintenance, its dividend slowly rose as the traffic grew, as follows:
The Opening of the Salisbury and Yeovil Railway - 1860 |
1863 - £4 12s 6d
1865 - £5 5s 0d
1867 - £6 10s 0d
1869 - £6 5s 0d
1871 - £6 15s 0d
Indeed, this gradually worried the L&SWR's management, as it was paying increasingly large amounts of money to the S&YR. Thus, in 1872 it attempted to buy the company. This first bid, which offered the S&YR shareholders £150 of L&SWR shares for every £100 of S&YR, was rejected by the proprietors; The killer blow being a letter to them from another S&YR shareholder, Louis Henry Ruegg. He stated that with the L&SWR on the verge of opening new lines, the traffic passing over the S&YR, and the possible profits, were bound to increase still further. Indeed, the rejection of the L&SWR's offer was the smartest move the S&YR proprietors would make.
The S&YR's dividend continued to rise to £8 5s 10d in 1873, £9s 15s 0d in 1875 and 12 10s 0d in 1877. While dividends this high were commonly paid by some earlier railways, this was an astonishing return in the 1870s. Faced with having to purchase the S&YR at a very high price or leasing it for an massive yearly fee, the L&SWR resolved to buy the company again. The eventual sale cost the L&SWR dearly, and in early 1878 it exchanged each £100 S&YR share for £250 (5% preference) of its own.[2] Thus, right until its end, the S&YR's shareholders profited hugely from their company's relationship with the L&SWR.
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[1] Williams, R.A., The London and South Western Railway - Volume 1: The Formative Years (Newton Abbott, 1968), p.87-88
[2] Ruegg, Louis Henry Ruegg, (Sherborne, 1878), p.50-56
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