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Rio Tinto shareholders have emphatically rejected an activist investor’s proposal for the miner to review its primary London listing in favour of consolidating its shares in Australia.
Only 19 per cent of Rio’s combined shareholder base backed Palliser Capital’s proposal for a review, well short of the 75 per cent needed to adopt the resolution formally.
It was also shy of the 20 per cent threshold that would have triggered an informal “consultation” under London listing rules.
The debate over Rio’s future on the London market had raised concerns that the UK’s reputation as the home of mining stocks could suffer another blow, after BHP’s exit and Glencore’s decision to review its listing potentially paved the way for a switch to a rival market.
Rio held its annual meeting in Perth on Thursday, three weeks after British investors attended a similar meeting and voted on the proposal to review its share structure. More than three-quarters of the company’s shareholders hold UK-listed stock.
The mining company only published the aggregate result after the Australian shareholders had also voted.
Rio, an Anglo-Australian company with a global asset base, has been under pressure from the British hedge fund to unify its dual-listed share structure on the Australian exchange.
Palliser put forth a resolution calling for a committee of independent directors and a shareholder representative to review whether unification would be in the interests of shareholders, and then publish a detailed report of its findings.
The fund made its case at the Perth meeting with a lengthy presentation that argued unification would raise Rio’s share price and allow it to make major share-based acquisitions.
James Smith, Palliser’s chief investment officer, highlighted that 80 per cent of Rio’s earnings came from Australia. “Australian profit is used to pay UK dividends,” he told shareholders in Perth.
Smith ran a similar three-year campaign against BHP when he worked at hedge fund Elliott Management. It culminated in the mining company collapsing its listings into a single ASX one in 2022.
Palliser also cited logistics provider Brambles as another company that increased its value by consolidating its shares on the ASX.
Rio has repeatedly dismissed Palliser’s claims, arguing that such a move would cost billions of dollars in taxes due to the change of control and that the combined stock would trade at a lower price than the current ASX-listed shares.
It contracted EY last year to explore the proposal and canvassed shareholders in London and Sydney before ruling out the move.
Rio chair Dominic Barton described consolidation as “value-destructive” at the Perth meeting but said the miner would always be “open-minded” about proposals to increase value.
Proxy advisers Glass Lewis and ISS had recommended a further review of the company’s share structure in the run-up to the annual meeting.
Several key shareholders in the UK and Australia voted against the resolution, including Royal London Asset Management, Ninety One, Ausbil and the Australian Foundation Investment Company.
“An independent review would be unnecessary and a distraction,” said George Cheveley, portfolio manager at Ninety One in London.
Palliser’s Smith said the proposal, even though it fell well short of the 75 per cent support needed to succeed, had still put the issue on Rio’s to-do list.
“They must come up with a solution that fixes this outdated structure,” he said.
