By Melanie Burton and Clara Denina
MELBOURNE/LONDON (Reuters) – An overwhelming majority of Rio Tinto shareholders sided with the board to vote against an activist fund proposal that the mining company should review its dual listing in Sydney and London.
The mining giant said on Thursday that 19.35% of shareholders backed the motion put forward by London-based Palliser Capital.
That was only just below the 20% threshold that would have required Rio Tinto to consult more widely with shareholders under UK regulations, implying the idea might come up again.
Rival BHP, which has a primary listing in Australia, ended a similar dual-listed structure in 2022, six years after activist investor Elliott began its campaign for a single listing.
Palliser wants Rio Tinto to unify into a single holding company based in Australia, saying this could unlock $28 billion in value for holders of the company’s London shares.
The London listing comprises about 77% of Rio’s investor base, but the Australian-listed shares are trading at a premium of about 25%, partly due to tax advantages available to shareholders there.
“Rio Tinto will continue to engage with our shareholders and will carefully consider the feedback provided,” a spokesperson said.
Holders of its Australian stock voted on Thursday and holders of its UK shares voted at the London AGM on April 3.
London-listed shares rose nearly 1% by 1037 GMT.
Rio Tinto’s board had unanimously recommended voting against the resolution, citing tax considerations. It also said a unified listing would be costly and did not provide the flexibility for big M&A that Palliser had suggested it would.
CATALYST FOR CHANGE
Palliser said its campaign has been a catalyst for an improved understanding of the case for unification.
“We will… ensure that institutions are well informed of the pertinent issues, enabling them to actively challenge leadership rather than voting, as a default, in line with board recommendations,” James Smith, Palliser’s founder and chief investment officer, said in a statement.
Smith formerly worked for Elliott and helped run its campaign against BHP’s dual listing.
Palliser’s motion was backed by influential proxy adviser firms Institutional Shareholder Services (ISS) and Glass Lewis and more than 100 other shareholders, while Norway’s Norges Bank Investment Management, the world’s largest sovereign wealth fund, voted against it. It holds 2.5% in Rio’s London stock.
Talking to Australian shareholders at the company’s Perth AGM, Rio chairman Dominic Barton said: “There is no basis for expecting that an additional review would lead to a different conclusion.”
“But I also want to be clear that we are open-minded about all routes that maximise value for you, our shareholders, and that’s the lens through which we assess this topic,” he added.
Goldman Sachs analysts in March estimated the total cost of collapsing Rio’s dual listed companies could range from $7 billion to $15 billion.
(Reporting by Melanie Burton and Clara Denina; Additional reporting by Himandshi Akhand; Editing by Edwina Gibbs and Barbara Lewis)
