THE Paignton and Dartmouth Steam Railway winds its way along some of South Devon’s most picturesque coastline, seemingly untouched by the years.

But behind the scenes there is a bitter takeover battle of a kind more familiar to occupants of boardrooms in the City.

The directors of the Dart Valley Railway Company claim that at stake is the future of the seven-mile line and its assets, which include six engines, four stations, three viaducts and a tunnel.

They fear that the line could be bought, broken up and its land redeveloped after a millionaire businessman has gradually increased his holding in the company over the past seven years.

David Barry, a Guernsey-based investor, needs only 5 per cent more of the company’s shares to hold a 30 per cent stake. By law, the retired merchant banker would then be obliged to launch a formal takeover bid.

Despite Mr Barry’s insistence that he does not wish to take over the company, let alone break it up, the directors have written to shareholders urging them to reject his generous offer of £13 for their shares, which is at least twice the market rate.

They are concerned that if he acquires more than 25 per cent of the company he will have the power to block special resolutions made to shareholders at general meetings.

As sole director of Value Investment Holding, Mr Barry recently increased his holding of Dart Valley Railway Company shares from nearly 17 per cent to 25 per cent. The company’s board described the offer of £13 for each £1 share as unwelcome and has tried to prevent Mr Barry from gaining more shares. They have sent a letter to 2,700 shareholders assuring them that none of the company’s directors intends to sell his or her holding, which adds up to 11.25 per cent of the business.

Dart Valley Railway’s profits rose 80 per cent last year, with an after-tax surplus of £317,446, and the company has an annual turnover of more than £2.5 million.

Shareholders fear that the company’s assets, which are valued at just over £3 million, could be sold off and the stations redeveloped, fetching a possible £20 million.

The steam railway attracts 300,000 visitors a year, with ten trains a day running over the summer, until October. The company has a full-time staff of 30, plus about 50 volunteers.

Mr Barry denied that he had any negative intentions for the company, saying that he cannot afford a takeover bid. “It’s an excellent company that makes a profit,” he said.

“The company is not just a railway, it also runs ferries and buses. I would like to see it grow and expand. It’s worth a lot more as it is. I see this as a long-term investment. I don’t intend to bid for the company and I’ve no wish to be involved in managing it.”

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