Little fellows out of favour at Tower

Insurer and fund manager Tower plans to cull small shareholders this year to cut costs.

Its April shareholders' newsletter says the company will offer small shareholders the chance to sell shares or top up holdings at a discounted brokerage rate.

"The registry and communication costs associated with a large number of small shareholdings are substantial and it is in the interests of all shareholders that Tower tries to reduce costs wherever possible," the newsletter says.

Tower is one of the most widely held New Zealand companies, with about 86,000 local shareholders and 30,000 in Australia.

Its last annual report said 83,145 of Tower's shareholders held fewer than 1000 shares. Philippa Ellis, Tower's general manager of investor relations, said small shareholdings also increased after the spin-off of Tower's Australian Wealth Management unit this year.

AWM is now listed on the Australian Stock Exchange.

Formerly Government Life, Tower was demutualised and floated on the stock exchange in 1999, with shares distributed to policyholders.

Ellis said Tower ran similar programmes in 2001 and 2002, cutting shareholder numbers from 300,000.

Tower's first offer was to shareholders with fewer than 200 shares - and only 39 per cent of them accepted.

The second was to shareholders with fewer than 400 shares - and only 20 per cent sold out or increased their stakes to at least 400 shares.

Ellis said Tower got no negative feedback from shareholders on the offers.

The company sometimes got calls from shareholders who owned 23 shares and could not sell them through a broker.

She would not say how much money Tower hoped to save.

Details of the programme had yet to be finalised.

Under stock exchange listing rules, the minimum holding in a company with a share price between $1 and $2 - Tower is at $1.81 - is 200.

Companies can compulsorily acquire "unmarketable" parcels of less than 200 shares.

Tower is not the only company to run what it calls "small shareholder programmes".

In 2003, Telecom offered to pick up the brokerage tab for shareholders wanting to build a stake of 1000 shares or sell fewer than 1000.