By Melanie Burton and Clara Denina
MELBOURNE/LONDON (Reuters) -London-based hedge fund Palliser Capital on Monday urged Rio Tinto (NYSE:RIO) to allow the company's Australian shareholders to vote on a resolution that seeks an independent review of its dual-listing status.
The global miner's British shareholders are set to vote at its annual general meeting in London on April 3 on a resolution from Palliser that seeks a review of the company's dual-listed structure, which the fund said was inefficient and "value destructive". Rio Tinto has recommended investors vote against the resolution.
That resolution is not on the agenda for the miner's annual general meeting of Australian shareholders in Perth on May 1.
That has deprived Australian shareholders of their right to vote alongside British shareholders on a topic that is of equal consequence to them, Palliser said in a letter to the company.
The miner's corporate structure requires separate annual meetings for London-listed Rio Tinto Plc and Australian-listed Rio Tinto Limited.
Rival BHP ended a similar dual-listing structure in 2022 after pressure from activist investors and now has a primary listing in Australia.
A Rio Tinto spokesperson said Palliser had submitted a requisition notice for Rio Tinto Plc, but had not yet done so for the Australian arm.
"They have now informed us that they wish to submit a requisition notice for the AGM of Rio Tinto Limited, and we have informed them how to do this," the spokesperson said.
Palliser did not have an immediate comment on whether it had submitted a requisition notice.
The London listing comprises about 77% of Rio Tinto's investor base, but the Australian-listed shares are trading at about a 20% premium, partly due to tax advantages available to Australian shareholders.
"If you were a PLC holder, why wouldn't you want your stock to climb 20%?" said Barrenjoey analyst Glyn Lawcock.
To bring the listing balance into closer alignment, Rio Tinto would either have to buy back its London-listed shares or launch a capital raising in Australia, which the company has said it would consider to shore up its balance sheet after its $6.7 billion buyout of lithium miner Arcadium.
One major hurdle for a buyback of the London shares is that Aluminium Corporation of China, or Chinalco, holds just under a 15% stake in Rio's London entity and cannot increase its stake beyond that without approval from the Australian government, based on assurances it gave after it bought the stake in 2008.
A source familiar with Chinalco's thinking said the state-owned enterprise wants to maintain its holding and does not want to be buying and selling Rio Tinto shares. Chinalco did not immediately respond to a request for comment.
The other option of a capital raising would dilute the holdings of current Australian shareholders.
"There's no balance sheet rationale to raise equity. If there is an issue with the UK valuation, that needs to be addressed there (via a buyback). It should not come at the expense of the Australian listing," said analyst Jack Gabb of Sydney-based investor Pendal Group.
($1 = 1.5768 Australian dollars)
($1 = 0.7925 pounds)