THE private equity bidder for UDG Healthcare is likely to have to increase its offer for the Dublin-based company after its largest shareholder said the bid undervalued the business.

Allianz Global Investors said the £2.6bn (€3.2bn) offer for the London-listed health services company from Clayton, Dubilier & Rice (CD&R) was “opportunistic and significantly undervalues UDG and its prospects”.

The active investment firm, which has an 8.6pc holding in UDG, said it was “minded not to accept the current offer despite it being recommended to shareholders by the Board of UDG”.

Equity market sources said Allianz’s intervention likely signalled a new phase in the bidding process and probably meant CD&R would have to sweeten the deal to get approval from a majority of shareholders.

Shares in UDG Healthcare soared nearly 21pc on May 12 after the board unanimously accepted the offer from the New York firm.

The cash bid, at £10.23 per share, represented a 21.5pc premium to the closing price on the previous day and a 30pc premium to the average price for the last six months.

Analysts expected the deal to close without being countered by other bidders. UDG shares finished at £10.17 on the day of the offer, indicating investors shared that expectation.

However, that early assessment has now been thrown into doubt with Allianz’s objection to the proposed price and the board may have some work to do to bring shareholders along.

“Having come through the trials of the pandemic with a strong balance sheet, AllianzGI believes UDG can realise the potential of recent acquisitions, consider further inorganic opportunities and improve the efficiency of its capital structure,” Allianz GI said in a statement.

“The offer made by Clayton Dubilier & Rice (CD&R) for UDG on 12 May 2021 implicitly supports AllianzGI’s view of UDG’s potential, but is at a price that does not adequately compensate existing shareholders for the opportunity foregone.”

UDG shares closed at £10.42 yesterday, suggesting investors were expecting CD&R – or a counterbidder - to ultimately come back with an improved offer.

The proposed transaction, if it closes, would reunite former UDG chief executive Liam Fitzgerald with the company he ran from 2000 to 2016 and grew from an Irish-based distribution business into a more diversified and international healthcare services provider.

Now an operating advisor for CD&R on European healthcare, Mr Fitzgerald is chairman Huntsworth, a provider of commercialisation services for pharmaceutical and biotech companies that CD&R bought last year and intends to merge with UDG’s Ashfield division.