Rio Tinto Stands Firm on Dual Listing Amid Activist Pressure

Rio Tinto, the world's second-largest mining company, has rebuffed calls from activist investor Palliser Capital to abandon its primary London listing, maintaining its commitment to the dual-listed structure. The UK-based hedge fund, which holds a stake worth about $250mn in Rio, has demanded an independent review of whether to follow rival BHP's lead and unify its corporate structure in Australia.

Palliser Capital argues that Rio Tinto's dual-listed structure, with its primary listing in London and a secondary one in Sydney, has been an "unmitigated failure" that has deprived shareholders of $50bn in value. The fund has proposed a committee of three to four independent directors, alongside an external shareholder representative, to review the change in corporate structure and listing. However, Rio Tinto has repeatedly said that unifying its listing would cost "mid-single digit billions of dollars" in tax and destroy value.

Rio Tinto's chief executive, Jakob Stausholm, has rejected the idea that the existing dual-listed structure is an obstacle to dealmaking. In an interview with The Wall Street Journal, Stausholm said, "We are reporting underlying earnings of $10.9 billion, after taxes and government royalties of $8.2 billion, and a healthy return on capital employed of 18%. Our strong balance sheet enables us to pay a $6.5 billion ordinary dividend, maintaining our practice of a 60% payout, the ninth consecutive year at the top end of our payout range, as we continue to invest with discipline."

Stausholm also dismissed the notion that collapsing the dual-listed company (DLC) structure would be impossible to get shareholder support, stating, "We are excited as we head into 2025, with all the building blocks for an incredibly successful, diversified and growing business in place, including the expected closing of the Arcadium acquisition in March."

The valuation gap between Rio Tinto's London and Sydney listings has widened to 19 per cent, from 15 per cent in May, according to Australian investment firm Blackwattle Investment Partners. This discrepancy in valuation is an indication that the dual-listed structure has not been beneficial to shareholders. However, Rio Tinto's strong financial performance and commitment to disciplined investment suggest that the company is well-positioned to continue creating value for shareholders.

In conclusion, Rio Tinto has stood firm on its commitment to the dual-listed structure, rejecting calls from activist investor Palliser Capital to unify its corporate structure in Australia. The company's strong financial performance and disciplined investment strategy suggest that it is well-positioned to continue creating value for shareholders, despite the widening valuation gap between its London and Sydney listings.