Rio Tinto Ltd's (LSE:RIO, ASX:RIO) board has called for shareholders to vote against a resolution proposed by activist Palliser Capital for the company to give up its London listing.
The activist investor last year called for Rio to follow its rival BHP in giving up London as its primary listing and dropping out of the FTSE 100, with an AGM resolution demanding that a committee of independent directors and an external shareholder representative assess whether unification into an Australian-domiciled holding company would be in the best interests of shareholders.
Rio Tinto directors argue that such a review is unnecessary, having already conducted a "robust and comprehensive" assessment with five external advisers, including Goldman Sachs, J.P. Morgan, Linklaters LLP, Allens and EY.
"A unification of the DLC [dual listed company structure] would be value destructive for the group and its shareholders. Assertions about US$50 billion of value erosion due to the group's DLC are both unfounded and misleading," the board stated.
According to the company, the tax costs associated with unification would be in the mid-single digit billions, reducing net asset value.
The Board also emphasized that further analysis would be duplicative and that the current structure provides sufficient strategic flexibility. It noted that Rio Tinto has outperformed the FTSE100 and ASX200 since forming the DLC in 1995.
"A further review of this topic would be wholly duplicative at a time of important execution against the Group's strategic objectives," the Board added.
Rio Tinto PLC's AGM is on April 3 in London with the Rio Tinto Limited AGM on May 1 Down Under.