Rio Tinto Urges Shareholders to Reject Dual-Listing Review
Investors holding Rio Tinto’s London-listed stock will vote on April 3, while those with Australian shares will vote on May 1
Rio Tinto stepped up its defense of its dual-listed structure, warning that an independent review, as urged by an activist investor, could distract the mining giant from its strategic goals as it seeks to increase output of commodities expected to be essential for the energy transition.
Palliser Capital, a London-based hedge fund, is pushing for the Anglo-Australian mining giant to unify its corporate structure into a single Australian-domiciled company, saying the current dual listing in London and Sydney erodes shareholder value. The activist investor has called for an independent review to assess whether unification would be in the best interest of shareholders, and has recently gained support from prominent advisory firms Glass Lewis and Institutional Shareholder Services, or ISS.
In a statement Wednesday, Rio Tinto said its board unanimously recommends that shareholders vote against a resolution for such a review, which was requisitioned by Palliser and some other investors for the miner’s upcoming annual shareholder meetings.
Directors have already conducted a comprehensive review with external advisers, concluding that the existing structure remains effective and beneficial for both Rio Tinto and its shareholders, the company said.
“A further review of this topic would be wholly duplicative at a time of important execution against the group’s strategic objectives,” it said.
Rio Tinto, the world’s second-biggest miner by market value, is shifting toward growth following years of prioritizing shareholder returns and repairing ties with communities–particularly after the destruction of two ancient rock shelters in Australia in 2020.
Chief Executive Jakob Stausholm recently said the miner is focused on building a stronger, more diversified and growing business, reflecting its confidence in the long-term demand for materials essential to the clean-energy transition. The company is expanding in commodities including copper and lithium, and this month completed a $6.7 billion acquisition of Arcadium Lithium.
It is also doubling down on efforts to enhance its existing operations while working to reduce its environmental impact, including cutting carbon emissions.
Founded in London in 1873 to mine copper along the Rio Tinto river in southern Spain, the miner became a dual-listed company in 1995 with the merger of its U.K. and Australian assets.
In pressing for Rio Tinto to unify its structure, Palliser argues that the dual listing has destroyed about $50 billion in shareholder value. Rio Tinto refutes this claim, calling it “both unfounded and misleading,” adding that unifying its corporate structure “would be value-destructive for the group and its shareholders.”
Palliser manages about $1.1 billion in assets and holds a roughly $300 million stake in Rio Tinto, which has a market capitalization of more than $100 billion. In a letter to Rio Tinto’s board in December, Palliser said its investment in the company is one of its largest public equity positions.
The hedge fund says Rio Tinto’s current structure restricts its ability to pursue stock-based deals and fully utilize its Australian tax credits. Rio Tinto disputes these claims.
Palliser engaged Grant Thornton Australia to assess whether the advantages of a potential unification outweighed the disadvantages based on publicly available information. It concluded they did, benefiting shareholders of both the London- and Sydney-listed stock.
Rio Tinto said its own review last year included substantial input from five external advisers, including Goldman Sachs and JPMorgan.
The miner said it has held seven meetings with Palliser across 2024 and this year and has spoken to many other shareholders since last summer to understand their views on the issue.
It said the board will continue to periodically examine the merits of the dual listing but cautioned that a public review carries risks. “The board believes that disclosure of further analysis in key commercially sensitive areas would be prejudicial to shareholders’ interests,” the miner said in the statement.
BHP Group, the world’s largest miner by market value, dropped its primary listing in London in 2022 to unify its corporate structure in Australia. However, at the time, most of BHP’s shares were held in Australia, whereas 77% of Rio Tinto stock is held in London, Rio Tinto said.
The tax costs associated with unification have been contested by Palliser and Rio Tinto. The miner said it expects these costs to be in the mid-single-digit billions of dollars. Palliser, however, estimates that unification may trigger one-off transaction costs of roughly $450 million and additional ongoing tax costs of about $145 million per year.
Palliser’s resolution calls for Rio Tinto to form a committee of independent directors to assess whether unification would be in shareholders’ best interests. It also seeks the commissioning of an independent expert report and the publication a detailed review of its findings.
Under the dual-listed structure, Rio Tinto hosts two annual general meetings for shareholders. Investors holding Rio Tinto’s London-listed stock will vote on April 3, while those with Australian shares will vote on May 1.