NEW YORK (REUTERS) - Hyatt Hotels Corp is in talks to buy US hotel operator Starwood Hotels and Resorts Worldwide Inc in a cash and stock deal, a source familiar with the matter said.

Hyatt's management would retain control of the combined company and a deal could be announced in the coming weeks, the source told Reuters.

Starwood, which owns the St. Regis and Sheraton hotel brands, is valued at about US$12.75 billion (S$17.89 billion), while Hyatt has a valuation of about US$7.23 billion. Both companies declined to comment.

China's sovereign wealth fund and two big Chinese companies had expressed interest in Starwood Hotels, joining other suitors from around the world, a source familiar with the matter told Reuters on Tuesday (Oct 27).

"My hunch is Hyatt would be able to buy Starwood. They could pull it off but it would be a stretch," Argus Research Co analyst John Staszak said.

He said a foreign acquirer might be ideal as it would be willing to pay a premium price.

Starwood had reached out to potential bidders including InterContinental Hotels Group, Wyndham Worldwide Corp and sovereign wealth funds in July, three months after it decided to explore a sale, sources told Reuters.

According to Nomura Securities analyst Harry Curtis, Starwood could be bought at over US$100 per share, which would value the company at more than US$17 billion. "Assets like HOT (Starwood) do not come up for sale often, so it is unrealistic to believe that a suitor could buy the company close to its current tag sale valuation," Mr Curtis wrote in a note.

Interval Leisure Group said on Wednesday it would buy Starwood Hotels' vacation ownership business, which it valued at about US$1.5 billion.

Starwood also on Wednesday reported a better-than-expected third-quarter profit, driven by higher occupancy rates.

Rival Hilton Worldwide Holdings Inc reported a higher third-quarter profit, helped by a rise in occupancy and room rates.