Rio Tinto Defends Its Dual Listing Structure Amid Activist Pressure

Rio Tinto, one of the world’s largest mining giants, has weathered a sustained activist investor campaign to dismantle its dual-listed company (DLC) structure, which has been a cornerstone of its corporate strategy since 1995. Despite aggressive pushes by Palliser Capital and its allies to unify the London- and Australian-listed entities, shareholders have twice rejected the proposal, signaling confidence in the status quo. Here’s why the debate matters for investors—and what lies ahead.

The Activist’s Case: Closing the Value Gap

Palliser Capital, the London-based activist behind the campaign, argues that Rio Tinto’s DLC structure creates a $28 billion value gap favoring Australian shareholders. The firm claims unification into an Australian-domiciled holding company would eliminate the 25% premium of Rio Tinto Limited (ASX: RIO) shares over Rio Tinto plc (LSE: RIO), benefiting London investors. Palliser also asserts that the current structure stifles strategic flexibility, forcing the company to use cash instead of shares in mergers and acquisitions, and risks losing $50 billion in value over time due to tax inefficiencies.

Proxy advisors ISS and Glass Lewis have supported Palliser’s push, citing the success of peers like BHP, which unified its DLC structure in 2022. A Grant Thornton report commissioned by Palliser in 2025 further claimed that unification could close the share price discount and enhance capital market access in Australia, where mining equities dominate exchanges.

The Board’s Defense: Tax Risks and Proven Performance

Rio Tinto’s board has consistently rejected the proposal, citing $5–10 billion in deferred tax liabilities and $1.2 billion in annual “wastage” of franking credits if the structure were dismantled. Franking credits, tax benefits for Australian shareholders, are critical to the current system: 83% of Rio Tinto’s shareholders are non-Australian residents who cannot use them, but their existence allows fully franked dividends that attract Australian investors.

The board also highlights the DLC’s strategic advantages:
- Market Access: Listings in London, New York, and Australia provide liquidity and diversification, with Rio Tinto ranking among the top-10 constituents of the FTSE 100.
- Performance: Since 1995, Rio Tinto Limited shares have risen 320% (vs. 140% for the ASX 200), while Rio Tinto plc delivered a 450% total return (vs. 280% for the FTSE 100).
- Flexibility: The structure enabled equity-backed acquisitions like the Arcadium Lithium project, avoiding cash burn that could threaten dividends.

The stock’s resilience amid commodity cycles underscores investor faith in the DLC’s utility.

2025: A Stalemate, But Risks Remain

In 2025, Palliser renewed its push with resolutions at Rio Tinto’s AGMs, but the board’s arguments held sway. Shareholders again rejected the proposal, with 80.65% opposing in 2024 and a similar outcome expected in 2025. Key sticking points included:
- Tax Costs: EY’s analysis warned of $4.5 billion in one-off tax costs and $145 million annually post-unification.
- Franking Credit Loss: The board argued that losing franking credits would harm Australian shareholders, potentially depressing the share price.
- BHP Parallels: While BHP’s unification succeeded, Rio Tinto’s leadership stressed structural differences, including a larger London shareholder base (77% vs. BHP’s 42%) and tax exposure tied to Australian assets.

Investor Implications: Stability vs. Reform

For investors, the debate hinges on weighing short-term gains (closing the share price discount) against long-term risks (tax liabilities and strategic flexibility). Rio Tinto’s $1.4 trillion market cap and consistent dividend policy (60% payout ratio in 2024) suggest the current model works. However, the 25% share premium for Australian investors remains unresolved, and operational challenges—such as climate costs and the Tomago smelter’s uncertain future—could reignite calls for change.

Tax implications loom large, but the board argues they outweigh potential benefits.

Conclusion: A Structure Built to Last—For Now

Rio Tinto’s survival of activist pressure underscores the DLC’s enduring value. The structure has delivered superior returns, tax efficiencies, and strategic flexibility over decades, while shareholders have shown reluctance to gamble on unproven reforms. That said, the 25% share price disparity and ongoing scrutiny mean this isn’t the end of the debate. Investors should monitor commodity prices, tax policies, and shareholder activism, but for now, the board’s defense appears to have held. As CEO Jakob Stausholm put it: “London works for us”—and for shareholders, that’s enough to keep the status quo intact.

Final Note: With Rio Tinto’s shares trading at a 10-year average dividend yield of 5.2%, the company’s ability to balance growth, dividends, and structural integrity remains its strongest argument for the DLC’s continued relevance.