Activist Pushes for Listing Unification as Rio Tinto Abandons $5 Billion Equity Offering

Activist investor Palliser Capital has once again stressed the importance of Rio Tinto (RIO) unifying its dual-listed corporate structure. The hedge fund advocates for the company to shift from its London listing to an Australian one.

According to a report by Grant Thornton Australia, which was highlighted in a letter sent to Rio Tinto’s chairman, the current dual-listed structure (DLC) imposes restrictions that hinder the company’s ability to engage in stock-based mergers and acquisitions. This structure also complicates efforts to raise equity capital and results in a pricing imbalance between its listings in the UK and Australia.

Palliser Capital, which has invested approximately $300 million in Rio Tinto, argues that the existing structure is inefficient and “value destructive,” limiting the company's capacity to reach its full potential. In contrast, competitor BHP Group successfully consolidated its dual-listed structure in 2022. Should Rio Tinto follow suit, it could mean a significant blow to the London Stock Exchange (LSE), which has seen a considerable reduction in its listings since 2015.

Rio Tinto has maintained its current dual-listed model since 1995, operating separate entities in the UK and Australia. The company's shares are traded on both the LSE and the Australian Securities Exchange, with shareholder voting rights and dividends structured to ensures equity. This dual structure also necessitates the company to hold two annual general meetings, one in London and another in Perth.

Despite the complexities of the DLC, Rio Tinto has defended its use, asserting that it ultimately benefits shareholders and supports overall returns. The company conducted a review of its structure in 2024 and concluded that it remains an effective model. Moreover, management has pointed out a strong track record of dividends, noting that the firm is among the top dividend payers in the UK.

This ongoing debate will come to a head at Rio Tinto’s upcoming annual general meetings, where UK-listed shareholders will cast their votes on April 3, followed by Australian-listed shareholders on May 1. So far, Palliser has reportedly rallied support from more than 100 shareholders for their cause.

The situation has the potential to shift based on recent developments in the capital markets. Recently, Rio Tinto completed a $6.7 billion acquisition of Arcadium Lithium, which opened discussions about a share sale that could have raised up to $5 billion. However, following intense pushback from investors, management decided to abandon this idea and chose to improve the company's financial position using an existing bridge loan facility instead.

As these discussions continue, the future structure of Rio Tinto remains uncertain, hinging largely on shareholder sentiment and market conditions.

Activist, Investment, Companies