How to Test Different Classes

The Gross Assets Test

The gross assets test involves dividing the assets involved in a transaction by the total assets of the trading PLC participating in the transaction. The total assets of the PLC include both its non-current and current assets.

When a transaction involves:

• An acquisition that will result in the consolidation of the gross assets of the undertaking in the traded PLC's financial statements; or
• A disposal that will result in the cessation of the consolidation of the undertaking's assets in the traded PLC's financial statements;

the gross assets involved in the transaction is the full value of the undertaking's assets, regardless of the interest acquired or disposed of.

For transactions involving a non-consolidated interest in an undertaking, the gross assets associated with the transaction equals:

• The consideration plus any liabilities assumed (in case of acquisition), and
• The assets attributed to that interest in the traded PLC's accounts (in case of disposal).

If a transaction involves an acquisition of assets that are not an interest in an undertaking, the assets involved in the transaction are equal to the consideration, or, if greater, the book value of those assets as they will be included in the PLC's financial statements.

The Profits Test

You can calculate the profits test by dividing the profits attributable to the assets involved in the transaction by the profits of the traded PLC. Profits are defined as all earnings after accounting for all costs except for taxation.

• For an acquisition or disposal of an interest in an undertaking, the profits represent 100% of the undertaking's profits, regardless of the interest acquired or disposed of.

When calculating the profits test, the losses of the PLC or target undertaking are also considered.

The Consideration Test

The consideration test involves calculating the consideration for the transaction as a percentage of the aggregate market value of all the traded PLC's ordinary shares (excluding any treasury shares).

To work out this test:

• The consideration is defined as the total amount paid to the contracting party.
• If the consideration includes securities to be traded on a market, the consideration attributable to those securities is their aggregate market value.
• If deferred consideration is possible in the future, the consideration is the maximum total consideration under the agreement.

For consideration consisting of existing or new securities to be listed, the figures used are the aggregate market value of these securities on the last business day before the announcement as per section 1110O(1).

The aggregate market value used to compute this test is that of the traded PLC's ordinary shares (excluding treasury shares) at the close of business on the last business day just before the announcement under section 1110O(1).

The Gross Capital Test

The gross capital test is computed by dividing the gross capital of the undertaking in question by the gross capital of the traded PLC.

The gross capital of the company or business involved refers to:

• The consideration (as determined under the Consideration Test),
• If it's a company, any of its shares and debt securities that aren't being acquired,
• All other liabilities (excluding current liabilities), including minority interests and deferred taxation.
• Any excess of current liabilities over current assets.

The gross capital of the traded PLC is the sum of:

• The market value of its shares (excluding treasury shares) and the issue amount of the debt security,
• All other liabilities (excluding current liabilities), including minority interests and deferred taxation.
• Any excess of current liabilities over current assets.

The values used for calculating the gross capital percentage ratio must not include any treasury shares held by the company.