The gloves have come off in a battle between the Transat board and one of Quebec’s largest biggest private land developers in a battle for the hearts and minds of Transat shareholders. At stake is no less than the future of Canada’s largest integrated tour company.

A special committee of Transat’s board which is reviewing the company’s future, including its proposed merger with Air Canada, has advised shareholders to reject Groupe Mach’s offer to buy 19.5% of Transat shares. The board calls Mach’s proposal “highly abusive, coercive, misleading and conditional,” in a letter to shareholders released Tuesday.

Mach proposed last week to buy the shares in a bid to stop Transat’s purchase by Air Canada. The real estate investment firm argues Air Canada is undervaluing Transat’s worth, and offers no guarantees for crews, suppliers or head office functions.

Mach is offering $14 per share, worth up to $88 million, if it manages to buy 19.5% of voting shares, just below a 20% threshold that would trigger takeover provisions in Canadian securities laws.

Air Canada is offering to buy all of Transat’s shares in a $550 million all-cash merger, though it is promising to maintain Air Transat’s brand and head office functions in Montreal.

“The Board, the Special Committee and their advisors categorically reject Mach’s Scheme as highly abusive, coercive, misleading and conditional, and prejudicial to the interests of shareholders and putting them at significant risk by unfairly disregarding their interests and subverting applicable securities rules designed to protect shareholders and treat them fairly and equally and to protect the integrity of capital markets,” the Transat board said in a news release.

The Transat board said it would take Mach’s proposal to the provincial securities regulator, as well as examining other potential legal remedies.

“Contrary to its claims that it is seeking to protect Transat’s shareholders, Mach’s Scheme is highly prejudicial to their interests and coercive,” argues the Transat board. “It is designed to create uncertainty to entice shareholders to act quickly and contrary to their own interests.”

“In contrast, the Air Canada Arrangement is fair to all shareholders and provides liquidity for all of the shares held by all of Transat’s shareholders, not only a small fraction of them.”

Transat has called a special meeting of shareholders in Montreal August 23 to vote on the merger. The board is urging shareholders to approve the sale, saying it represents the best option for employes, suppliers, partners and shareholders.

Air Canada has already submitted the merger to Canada’s Transport Minister, who has until the end of August to decide whether to launch a public interest review. If a review is launched, which seems likely given the stakes, the minister would study the merits of the deal with the input of the Competition Bureau.