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Transat AT Inc.’s share price jumped past $14 on Wednesday, the day Air Canada’s exclusive talks to buy the airline and travel operator expired. The two companies have in been in negotiations for 30 days for a takeover that would merge Canada’s largest and third-largest airlines at $13 a share, or $520-million.

Transat shares closed at $14.19 Wednesday as investors signalled their belief that Air Canada – or another buyer – will pay more than that.

Montreal real estate developer Groupe Mach has proposed buying Transat for $14 a share, and on Tuesday positioned itself as a more credible bidder by dropping a condition that it receive $120-million in financing from the province of Quebec.

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Pierre Fitzgibbon, Quebec’s Economy Minister, said on Wednesday the provincial government’s finance arm, Investissement Quebec, told Mach it would support its bid for Transat on certain conditions, including that Mach find another investor to share the risk and that Mach be invited by the vacation company into its data room to perform due diligence.

The government did not agree to commit the entire $120-million Mach requested from the government, Mr. Fitzgibbon said. The minister declined to say how much money was pledged.

“It’s non-binding support so-to-speak that was made available, which is frankly the only thing we could do,” Mr. Fitzgibbon said. “It’s impossible to make a commitment when you don’t have all the data.”

At least two large Transat investors have said they will oppose a sale at $13 a share.

Talks between Air Canada and Transat continued on Wednesday, and could yield no deal. The companies could also agree to extend the exclusivity period, or announce the takeover.

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A Transat spokesman said the result would be announced by Thursday morning. “There is going to be news either way,” Christophe Hennebelle said.

Any deal requires approval by two-thirds of Transat shareholders, in addition to legal and government approvals.

An Air Canada-Transat deal is expected to undergo strict scrutiny from Canada’s competition watchdog, given the two airlines command a combined 60-per-cent share of cross-Atlantic travel from Canada, and much of the Montreal air-travel market.

Transat is Canada’s third-largest airline, with 5,000 employees and about 40 planes serving 26 countries. Air Canada has a staff of 30,000 people, about 190 planes and flies to more than 220 places on six continents. Air Canada’s discount brand, Rouge, operates 53 passenger jets while its regional carrier, Air Canada Express, flies about 150 smaller aircraft.

Analysts say Transat’s shift toward a newer, all-Airbus fleet adds to its strategic appeal for Air Canada at a time the bigger carrier’s 24 737 Max jets are grounded – along with the world’s fleet – after two recent crashes killed 346 people.

In addition to adding fuel-efficient, long-range Airbus A321 Neos, Transat’s strategic shift includes spending US$750-million to own or operate 5,000 hotel rooms at major sun destinations by 2024.

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Transat has lost money, measured by adjusted profits, in two of the past three years, and is expected to be in the red in 2019. Analysts say Transat’s reliance on the price-sensitive leisure travel market and costs of its sun-destination vacation business are dimming near-term prospects without a clear long-term payoff.

Investors have taken heed, sending the share price on the Toronto Stock Exchange to less than $5 in April, not long before Transat said it was in talks to be bought.

With files from Nicolas Van Praet

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