Rhoen Klinikum is in talks with six potential acquisitors, according to a buy note dated October 16 from JP Morgan. Meanwhile, according to analysts, care home group Cursana is in talks with two targets, each with 800-1,000 beds.

JP Morgan rates Rhoen a 'buy' because:

a) It expects reimbursements to increase by 2.5% in 2009, up from 0.3% in 2008 and -1% in 2007.

b) It expects the declining economy to lead to more acquisition opportunities as more public hospitals are sold. The Deutsche Krankenhaus Institut barometer, a measure of budgetary sentiment, has shown its first decline in four years. 

c) Rhoen can now drive into the €36bn ambulatory care and open polyclinics market by opening up specialist centres which don't compete with primary care referrers. The 55 practices it has already acquired are already contributing to profitability.

JP Morgan expects sales to rise 4.4% to €2.11bn, with post-tax profits ahead 9.9% at €122m.

Our Analysis: This confirms earlier suggestions that we will soon see a sell-off of public hospitals in Germany. It will be interesting to see if these really occur in 2008 rather than 2009!  Rhoen has far lower gearing than its main rival, Helios, which is owned by Fresenius.