Activist Investor Pushes for Unification of Rio Tinto's Corporate Structure Amid Abandonment of Equity Offering

Activist investor Palliser Capital has once again called upon Rio Tinto (NYSE: RIO) to consider unifying its dual-listed corporate structure. The hedge fund, which is based in London, is urging the mining giant to drop its listing on the London Stock Exchange (LSE) and concentrate solely on its Australian listing.

In correspondence with Rio Tinto’s chairman, Palliser referenced a report from Grant Thornton Australia. This report underlined the limitations imposed by Rio Tinto’s dual-listed structure (DLC), which hampers its capabilities for stock-based mergers and acquisitions, makes capital raising more complicated, and creates a disparity in share prices between the UK and Australian markets.

Palliser Capital has invested around $300 million in Rio Tinto and contends that the current dual structure is inefficient and “value destructive.” They believe this setup is preventing the company from reaching its full potential as it continues to navigate the complexities of maintaining separate entities in the UK and Australia. By contrast, their larger competitor, BHP Group, managed to unify its dual-listed entity in 2022, and many see this as a positive move for shareholder value.

If Rio Tinto acts on Palliser's suggestions, it would represent another setback for the London Stock Exchange, which has experienced a significant drop in listings—about a third—since 2015.

Rio Tinto has maintained its dual-listed structure since 1995, with shares trading on both the LSE and the Australian Securities Exchange (ASX). The company has designed its shareholder voting rights and dividend structures to ensure parity between the two markets. An implication of this structure is the need to hold two separate annual general meetings, one in London and another in Perth, Australia.

Despite these complications, Rio Tinto has defended the dual-listed model, stating it benefits shareholders and contributes positively to the overall returns of the group. In a comprehensive review undertaken in 2024, the company reaffirmed the effectiveness of this structure and pointed to a strong dividend history, maintaining its position as one of the top dividend payers in the UK.

The prospect of changing the corporate structure may come to a head during Rio Tinto’s upcoming annual general meetings, where UK and Australian shareholders will vote on differing dates—April 3 and May 1, respectively. So far, Palliser Capital has mobilized support from over 100 shareholders backing their position.

The backdrop of this conflict includes recent activities in the capital markets, which may influence the ongoing standoff between Rio Tinto's management and the activist investor. After completing a $6.7 billion acquisition of Arcadium Lithium just last week, Rio Tinto had initially considered a share sale of up to $5 billion. However, following significant pushback from investors, the management decided against this equity offering and instead chose to strengthen its financial situation using an existing bridge loan facility.

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Activist, Investment, Corporate