(Reuters) - Marriott Vacations Worldwide Corp, a U.S. provider of vacation timeshare properties, is in advanced discussions to merge with peer ILG Inc, according to people familiar with the matter.
The deal would bring together two of the biggest vacation ownership companies, with brands including Marriott, Ritz-Carlton, Westin, Hyatt and Sheraton. The combined company would have more scale to compete other hotel-branded rivals, including Hilton Grand Vacations Inc (>> Hilton Worldwide Holdings) and Bluegreen Vacations Corp.
ILG views Marriott's Vacations' offer as the best it has received so far, and is engaged in negotiations to try to clinch a deal by the end of the month, the sources said. The talks could still end without any agreement, the sources added.
The exact merger structure that Marriott Vacations and ILG are negotiating could not be learned.
The sources asked not to be identified because the negotiations are confidential. Marriott Vacations and ILG did not respond to requests for comment.
ILG also explored a merger with Apollo Global Management LLC Diamond Resorts International Inc, sources said last month. Talks between ILG and Diamond Resorts have now ended, according to the sources.
ILG shares rose 7 percent to $33.25 on the news, giving the company a market capitalisation of $4.1 billion. Marriott Vacations shares rose 5 percent to $135.00, giving the company a market capitalisation of $3.6 billion.
The deal negotiations come as the timeshare industry seeks to improve occupancy rates and shed its reputation of locking customers into complex contracts they do not understand, in the hope of becoming a more popular alternative for many U.S. vacationers.
Based in Miami, ILG is the exclusive global licensee for the Hyatt, Westin and Sheraton vacation ownership brands. The company managed approximately 250 resorts as of the end of December, and had more than 2 million members through its various membership and exchange programs.
In 2016, ILG acquired Vistana Signature Experiences, the timeshare business of Starwood Hotels & Resorts Worldwide Inc, for more than $1 billion in cash and stock.
In January, activist hedge fund FrontFour Capital Group LLC said it had nominated four candidates for election to ILG's board, accusing the company of refusing to engage in constructive talks about its strategy. ILG has disputed that it has not sought to engage with FrontFour, and said in February that its board of directors had formed a strategic review committee to consider a deal with other companies.
Marriott Vacations spun out of Marriott International Inc. Its portfolio consisted of more than 65 properties in the United States and nine other countries and territories as of the end of December.
Marriott Vacations also approached ILG last year, sources said at the time, but the companies could not agree terms.
(Reporting by Greg Roumeliotis and Liana B. Baker in New York; Editing by Nick Zieminski)
By Greg Roumeliotis and Liana B. Baker