THE RAILROAD which for many years was commonly spoken of as “The Alton” has had an
even longer history than the Mobile and Ohio.
The Alton and Sangamon, as it was first known, was chartered a
year earlier than the M&O and the Alton Railroad was merged into the
Gulf, Mobile and Ohio in 1947,
just one hundred years later. It
is impossible to crowd the history of this hundred years of service of
this famous sectional road into a few pages. Only
the briefest outline of the Alton’s important career is included in
the M&O the Alton and Sangamon was named for a city and a river.
This road was designed to join the fertile agricultural region
around Springfield, Illinois, with the Mississippi River at the river
port of Alton. The people
of Alton, who lived some 20 miles upstream on the Mississippi River from
St. Louis, dreamed of making their town a major city.
The coming of the railroad seemed to offer the means by which the
fertile midcountry of Illinois might be made tributary to Alton.
This little city was located about 3 miles above the confluence
of the Missouri and the Mississippi.
It also was about 10 miles below the mouth of the Illinois River.
The town was well situated
on land which did not flood or wash and hence offered an admirable site
for a river port. For this reason the people of Alton were eager to support the
premature 1837 Illinois program for internal improvements which called
for a railroad to be built to Alton.
Although the Panic of 1837 killed this undertaking, the people of
Alton did not give up their plans.
Several attempts were made to get construction started, and
finally in 1851 the Alton and Sangamon managed to complete the line from
Alton to the new state capital which had been named Springfield.
the decade of the fifty’s the road eked out a precarious existence and
somehow extended the line, first to Bloomington, then to Joliet.
During this 10-year period the road changed its name several
times and finally sank into bankruptcy.
Money was so scarce that wages were not paid, thus causing the
first strike on the road.
state of Illinois realized that the Chicago and Mississippi, as the road
was then named, must be reorganized on a firm basis if the line was to
serve the people of the state effectively.
A commission was appointed to reorganize the road.
In this action the company’s name was changed to the Chicago
and Alton Railroad Company. The
reorganization brought into the company the leased Joliet and Chicago,
and it was through this small company that the Chicago and Alton secured
its nineteenth-century man of destiny.
T. B. Blackstone had been chief engineer in the construction of
the Joliet and Chicago, as well as a major shareholder.
In 1861 he was made president of the Joliet and Chicago.
In 1864 Blackstone was made a director of the Chicago and Alton
and within three months was its president.
From that point the fortunes of the Chicago and Alton began to
change. Blackstone was not
the sole cause for this, because the reorganization had been well done,
but the expert administration of Blackstone made it possible for the
road to develop into a very valuable property.
1864 to 1899 the Chicago and Alton never failed to pay a dividend of 6
per cent per year, and it frequently paid as much as 8 or 10 per cent.
Blackstone was president for this entire period, and his
reputation and that of the Chicago and Alton increased throughout the
period. In 1864 the Chicago
and Alton operated 250 miles of line, but in 1899 it had almost 1,000
miles in operation. Kansas
City had been added as its western terminal, thus giving the road access
into three major rail centers of the Midwest.
the Blackstone era the Chicago and Alton lived an independent existence,
proud of its claim of being the best sectional road in the West.
Most of the freight of the Chicago and Alton originated along its
lines, and much of it terminated there.
By 1871 the Chicago and Alton hauled more coal into Chicago than
any other railroad; only the lake steamers brought more fuel to the
city. The Chicago and Alton
was also a prime mover of corn and wheat as well as livestock from its
Kansas City terminal. Blackstone
had been one of the developers of the Chicago Union Stockyards idea and
served as its president from 1864 to 1868.
the end of the century T. B. Blackstone had grown old and events outside
the C&A were also foreshadowing change for the line.
The high degree of prosperity of the road naturally would evoke
interest in the line. A number of major railroad systems were eyeing the Chicago
and Alton as a valuable addition to their holdings. The Goulds were interested in adding the Chicago and Alton as
the connecting link between the Missouri Pacific and the Baltimore and
Ohio. The Rockefellers, who
controlled the Missouri, Kansas and Texas, thought that the Chicago and
Alton would be a worthwhile addition to their lines.
E. H. Harriman was anxious to join the line to his Union Pacific
(UP) and Illinois Central operations.
these circumstances the purchase became too big for any one of these
units. When Blackstone and
his friends finally agreed to sell their stock, the asking price was
$175 per $100 share of common and $200 per share of preferred.
At this point Jay Gould was reported to have given up.
Then E. H. Harriman arranged for a syndicate comprised of several
of the major rail financiers of the day to enter the picture.
Blackstone’s price and terms were to be met.
One of the conditions of the sale was that if a majority of stock
should be deposited with the syndicate by March 1, 1899, then the
syndicate would agree to extend the same terms and prices to all
additional stock which should be turned in by April 1, 1899.
This forced the syndicate to buy all offered stock rather than
just enough to give voting control.
Blackstone had demanded this to protect his small stockholders,
many of whom were widows whose money had been entrusted to him for
investing and care. Newspapers
of the day spoke of the unusual terms and said that Blackstone himself
had not accepted an earlier offer for his stock, amounting to about
one-third of all shares, which would have netted him $1,000,000 more
than the final offer. Because
he controlled about 33 per cent of the stock personally, Blackstone was
able to set his own terms, since the charter of the C&A required a
two-thirds majority vote to issue new bonds.
Unless the syndicate traded with Blackstone, he could thus tie up
any refinancing plan which might be desired.
the final analysis, the syndicate bought about 95 per cent of all
C&A shares, for which they paid $39,773,425.
The road had outstanding 187,511 shares of common and 34,795
shares of preferred stock which
had a par value of $22,230,600.
With this action,
Blackstone’s beloved sectional railroad became merged into national
systems and rapidly lost its identity as an independent Midwestern road. Blackstone did not long survive the sale for he died on May 26,
1900, just a little more than a
year after consummation of the deal.
The syndicate meanwhile
had proceeded to revise the capital structure of the C&A in an
effort to recoup part of their tremendous cash outlay of nearly forty
million dollars. The first
move was to issue $32,000,000
in 3 per cent bonds.
These bonds were sold at 65
to the stockholders, who in
turn sold them to the public over a period of years.
If the bonds were sold at an average price of 90, a
profit of $8,000,000
would have been made by the
various stockholders. In
later years the Interstate Commerce Commission reported that $10,000,000
of these bonds were sold to insurance companies in New York for 96, which
would have indicated a larger profit at least on that bloc of
securities. In 1900 the
new owners of the Chicago and Alton voted a 30 per
cent cash dividend on all stock, which amounted to $6,699,000.
These funds came out of
the proceeds of the earlier bond sale, which thus left only $13,410,000
in cash out of a sale of $32,000,000
face amount of bonds.
At the same time that
these transactions were taking place, the physical properties were being
improved considerably. Expenditures
for maintenance of way maintenance of equipment, and other maintenance
went up sharply under the new regime.
For example, in 1900
the company spent $1,748 per
mile on maintenance of way, whereas in 1905 it
per mile. One report said that by 1907, 60 per
cent of the entire line had been reballasted, 70 per
cent had been laid with heavier rail, and ties had been renewed on 77
per cent of the main line.
The tractive power of locomotives had increased 132
per cent, capacity of all
freight equipment had been increased 146 per cent, and
the average capacity per car had gone up from 21.5
tons to 33⅓ tons.
Much has been written about the Harriman treatment of the Chicago and
Alton. Many writers have
stated that the road was gutted by the syndicate and then thrown aside
like a sucked-out orange. Certainly
the syndicate increased the capitalization tremendously in the six or
seven years that the Chicago and Alton was under its control.
The following table will show just what happened to the capital
structure of the road from 1898 to 1906.
In spite of the very
large increases in liabilities, the road was able to show increases in
gross and net revenues in the period 1900 to 1907.
By that time the road
had changed hands, and the Harriman interests were no longer in control.
the Chicago and Alton had
passed into the control of the UP and the Chicago, Rock Island and
Pacific (Rock Island) with the latter holding a majority of the stock.
the Rock Island stock was sold
to the Toledo, St. Louis and Western, better known in that time as the
Clover Leaf. When this
transaction took place, the C&A passed into the control of the
Clover Leaf and E. H. Harriman ceased to be the guiding hand in C&A
After the 1907
purchase of control of the
C&A by the Clover Leaf, the C&A began to lose ground
financially. Although some dividends were declared out of previously
accumulated surplus, the company soon lost its record of dividend
payments. By 1912 the
Chicago and Alton and the Toledo, St. Louis and Western were both in
dire straits. From that
date the Chicago and Alton showed a deficit for every year up to 1941 except
1923, 1925, and 1926.
For a number of years
prior to federal control in 1918, the
UP provided funds to keep it from going into bankruptcy.
This apparently was done by the Harriman family to hold down the
attacks on Harriman’s reputation because of the earlier transaction.
Theodore Roosevelt had attacked
Harriman bitterly and used the Alton affair as his principal talking
point. The controversy over
the propriety of the actions of the syndicate became front-page news and
remained in the public mind for many years after Harriman’s death in 1909.