Out of this turmoil and ultimate defeat arose another new company, the Beloit Iron Works, that was to start slowly but ultimately become the leader in its field. However, to focus on the ultimate failure only obscures the initial financial success, growth, and impact on Beloit of the 0. E. Merrill and Co. and the Merrill and Houston Iron Works.
The Merrill and Houston corporation was based on the assets, water wheel value, and profits of the 0. E. Merrill and Company. Net assets were about $32,000 in March 1870. S. T. Merrill then added the equivalent of $12,500 to this capital when he joined in August 1870. These assets of about $44,000 were increased by the 1870—72 profits of about $56,000 so that the new company had real net assets of nearly $100,000. (1) To this total, the Merrill's and Houston agreed to add $50,000 in stock representing the value of the Houston Water Wheel patent. Therefore, the new corporation was begun with 1500 shares of $100 par value stock - a total value of $150,000.(2)
The decision to value the patent separately from the other assets was undoubtedly the work of 0. E. Merrill and G. A. Houston, who jointly owned it. All four believed this was a legitimate addition because it had been so profitable in the past and because its future looked bright. (3) Nevertheless, the $50,000 figure was an arbitrary one though based on past experience.
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