A merger between Rio Tinto and Glencore should not be viewed as an opportunity for the former to simultaneously collapse its dual listed company (DLC) structure, keeping the deal as straightforward as possible, two Rio Tinto shareholders and a non-involved banker said.

Both shareholders, however, acknowledge that the merger – should it materialise – may act as a catalyst for an eventual unification of Rio Tinto’s listings, but disagree on when that may occur.

The merger is not the time to start exploring the collapse of the Rio Tinto structure, as it only adds more complexity, but it could provide a strong argument to do so in the coming years, said one of the shareholders, who also holds a position in Glencore.

The second shareholder, on the other hand, would like to see more immediate action. Rio Tinto will want to simplify whatever is on the extremes of complexity of this deal, and as quick as it can, which may mean outlining in the near term how and when it will collapse the structure, he said.

This could be communicated at the time of the deal announcement, not as a condition of the merger, but as part of a roadmap for how the combination will create value, this shareholder said.

The merger could be impacted in so many ways by uncertainty around the DLC, with the difference in relative valuation between the two sets of shares and currencies. And that provides an opportunity for a rival – the only feasible one being BHP – to present a cleaner deal with less complexity and risk, he added.

The issue at hand is that the ownership of Rio Tinto is split between a UK-listed entity (Rio Tinto Plc) and an Australia-listed entity (Rio Tinto Ltd), which each have their separate shareholder registers. The assets and operations, including key iron ore assets that are located in Australia, are held by the two entities together.

Roughly 77% of the share capital is listed in London and the remining 23% in Sydney, with the Australian shares trading at a significant premium. This raises questions around how to structure a potential deal, particularly one that is expected to be settled through the issuance of new shares.

Glencore and Rio Tinto announced on 9 January that they are engaged in preliminary discussions regarding a possible combination of “some or all of their businesses, which could include an all-share merger.”

The companies said a transaction would likely be executed as a scheme of arrangement with Glencore as the target.

Together, GBP 59bn-market cap Glencore and GBP 111bn market cap Rio Tinto would become the world’s largest mining company, outpacing rival BHP.

The deal is going to be the best way for Rio Tinto to solve the issues associated with its DLC structure, a sector banker in discussions with the parties said.

But while Rio Tinto’s DLC needs to be collapsed, it is also an opportunity for Glencore to simplify its London and Johannesburg listings, the banker added.

The non-involved banker, meanwhile, argued that the DLC debate is best left “for another day”.

“If you’re trying to get people on board, do you really want to bring listing venues into the mix, which threaten to confuse and complicate and just muddy everything? Then the vote won’t be about Rio/Glencore, it will be about the listing,” he said.

In March 2025, following a proposal put forward by activist investor Palliser Capital to unify the DLC structure into an Australia-listed holding company, Rio Tinto outlined its view that the rationale for doing so is flawed and would not create value for shareholders. At the time, this view was supported by other shareholders with 80.65% of votes cast against the proposal at the two AGMs in April and May.

According to the first shareholder, the one with shares in both Rio and Glencore, Rio Tinto isn’t attached to the DLC structure in the long term, but sees it as too risky and expensive to unify straight away because of potential change-of-control and capital gains tax issues, particularly in places like Mongolia where it has key copper assets.

This represents “billions of dollars” of increased material risk, the shareholder said.

Pure play versus scale

The issue of the DLC is linked to the argument around whether the valuation ascribed to scale, obtained through the potential merger, outweighs the premium that may be applied to the sum of the parts if broken up into pure-play commodity businesses, both shareholders said.

One widely mooted suggestion is that the DLC structure is simplified by spinning off the companies’ respective coal and iron ore businesses into the Australian limited company, while the base metals and other commodities remain in the London Plc, one of the shareholders said.

“But I don’t think it really is that simple,” he added. Such a solution takes away from the deal rationale, which is around building a mining company of such scale that investors take notice. “To double the market cap only to then half it again seems to defeat the point,” he said.

The second shareholder took a different view and noted that recent comments from Glencore CEO Gary Nagle – that the tech industry supports trillion-dollar companies and there is a need for mining companies with market caps in the hundreds-of-millions to scale up to stay relevant – should not dictate the rationale of the deal.

The value proposition around creating pure-play miners is strong, this shareholder said.

A combination with Glencore brings hundreds of assets and jurisdictions into the Rio Tinto portfolio, but the business will continue to trade with a conglomerate discount since its copper business will still be outweighed by its exposure to iron ore and coal, this shareholder said.

“There are cleaner ways to play the copper cycle than putting a dollar into Rio Tinto for 30 cents worth of exposure to copper,” he said.

A future split could be begun and communicated at the time the merger is announced, when the synergies and rationale would be explained and a timeline outlined for creating two best in class companies, with more info in due course, this shareholder said.

As a potential precedent, he mentioned Keurig Dr Pepper’s ongoing acquisition of coffee producer JDE Peet’s where a planned future spin-off of certain combined assets was outlined at the same time as the deal announcement.

Under the UK takeover code, Rio Tinto has until 5 February to announce whether or not it intends to make a firm offer for Glencore, although this deadline can be extended subject to consent from the Takeover Panel.

Glencore and Rio Tinto declined to comment.