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Switch Inc. (NYSE:SWCH) may be worth $34-$38/share in a potential sale to a strategic buyer or private equity firm after a report earlier this week that the data-center operator is exploring a sale, according to a J.P. Morgan analyst.
Two of largest strategic buyers including Digital Realty Trust (DLR) and Equinix (EQIX) could be interested in SWCH, J.P. Morgan analyst Richard Choe wrote in a note. DigitalBridge (DBRG) could also show interest, though given relative sizes a possible deal may be difficult.
"A potential take-out multiple in line with QTS or COR at 28-30x AFFOPS would provide a liquidity event at $34-38 per share and could be structured to keep management in control," Choe, who has an overweight rating and $28 price target on SWCH wrote in a note.
Switch announced in November that its board approved a plan for the company to convert into a real estate investment trust, or REIT, like many other data-center operators. The change followed a push from activist Elliott Management, who the company said in August would get a board set, as Switch announced it was evaluating a potential REIT conversion.
Switch is one of only a handful of publicly traded data-center REITs after much consolidation in the space in recent years including CyrusOne's (CONE) $15 billion announced sale to KKR and Global Infrastructure Partners and American Tower's (AMT) purchase of CoreSite Realty. Blackstone (BX) also purchased QTS Realty Trust for about $10 billion last year.