MONTREAL -- Quebec's securities tribunal has barred a developer's offer to buy up Transat (TRZ.TO) shares, halting Group Mach's bid to block the tour operator's sale to Air Canada (AC.TO).

The decision comes one day after the country's largest airline upped its takeover offer by $200 million in an effort to win shareholder support for its bid to take Transat private.

The new offer would see Air Canada spend $18 per share, rather than $13, bringing the total offer to about $720 million, up 38 per cent from a previously announced bid worth $520 million.

The would-be deal sent Transat shares soaring by $4.63 or 39 per cent to $16.42 in midday trading Monday.

Letko Brosseau and Associates -- Transat's biggest shareholder at 19.3 per cent -- has now given formal support to the fresh offer from Air Canada, the airline and Transat said. The investment firm said earlier this summer it would vote against the deal if the price stayed at $13 per share.

Group Mach's offer of $14 per share for 19.50 per cent of class B voting shares represented the only rival bid.

The tribunal ruling, which cites "clear abuse" of capital markets by Group Mach, means the Montreal-based company is not allowed to acquire any shares under its scheme and is expected to return promptly to shareholders any stocks already deposited.

The company is also forbidden from using any proxies associated with shares deposited under the scheme.

Transat spokesman Christophe Hennebelle suggested Air Canada's increased offer Sunday is backed by the tour company's biggest shareholders, which include the Fonds de Solidarite FTQ, the Caisse pension fund manager and PenderFund Capital Management.

"Obviously it's Air Canada's decision. But it happened after consultations with Transat's major stockholders, including Letko Brosseau, with whom we are now announcing a lockup agreement," Hennebelle said in a phone interview.

Group Mach chief executive Vincent Chiara called the Transat board's endorsement of the original Air Canada bid "disturbing."

"They still need to be accountable to shareholders on why they pushed that $13-per-share offer like they pushed it," Chiara told The Canadian Press.

"God knows had we not did what we did, this deal was done at 13 bucks. There was no other offer. So Air Canada was going to walk away paying $200 million less to this company than they should have or could have."

Chiara said he has received calls from interested parties about making a rival joint bid -- "but I'm not sure we're ready to go there."

"We're not ready to make a decision yet," he said. "But I've got to admit this is a real offer. This is finally a real offer."

Transat has agreed to an increased break-fee of $40 million, while Air Canada's break-fee remains $40 million.

Analyst Doug Taylor of Canaccord Genuity said Air Canada's bid "has a high potential of achieving the necessary shareholder support."

"The deal is still not a foregone conclusion," he added.

Shareholders are slated to vote on the Air Canada offer Aug. 23, which would still face scrutiny by regulators.

Air Canada and Transat command a combined 60 per cent slice of the transatlantic market from Canada, overlap on some sun destinations and maintain a firm hold on Montreal air travel.

Air Transat pilots, represented by the Air Line Pilots Association, said Friday -- before the new offer emerged -- that they support the Air Canada acquisition, citing "greater labour protections and job security."