EXCLUSIVE-Timeshare operator ILG explores merger with Apollo's Diamond Resorts-sources


March 21 (Reuters) - ILG Inc, a U.S. provider of vacation timeshare properties, is exploring a merger with Apollo Global Management LLC's Diamond Resorts International Inc as an alternative to a sale, people familiar with the matter said.

The merger would add more than 400 of Diamond Resorts' vacation destinations in 35 countries to ILG's 250 managed resorts in some 80 countries. Such a deal could also allow ILG CEO Craig Nash to lead the combined company.

ILG said last month that its board of directors had formed a strategic review committee comprised of independent directors to discuss a potential transaction with multiple parties, which it did not name.

Reuters reported last year that Marriott Vacations Worldwide Corp and Hilton Grand Vacations Inc had held talks about acquiring ILG.

While ILG is still exploring a sale to Marriott Vacations, it is also in talks about merging with Diamond Resorts, which is owned by private equity firm Apollo and could be valued at more than $3.5 billion, including debt, according to the sources.

The talks with Diamond Resorts are aimed at giving ILG leverage in case its negotiations with Marriott Vacations are not successful, one of the sources added.

ILG has a market capitalization of $4.1 billion and, as of the end of December, its debt stood at $570 million.

The sources asked not to be identified because the deliberations are confidential. ILG and Apollo declined to comment, while Diamond Resorts and Marriott Vacations did not immediately respond to requests for comment. (Reporting by Greg Roumeliotis and Liana B. Baker in New York Additional reporting by Carl O' Donnell in New York Editing by Nick Zieminski)