(Adds quotes from minister's statement, closing prices, details)
MONTREAL, Aug 26 (Reuters) - Air Canada's AC.TO planned acquisition of Transat AT TRZ.TO raises issues of public interest and will require additional scrutiny, including the impact on airline competition, before it can be approved, Canada's transport minister said on Monday.
Transat shareholders overwhelmingly voted last week in favor of Air Canada's C$720 million ($542 million) or C$18-a-share bid for the tour operator.
The deal between Canada's largest carrier and Transat, which runs leisure carrier Air Transat, would give Transat a 60% market share of select trans-Atlantic routes to and from Canada and would require domestic and European regulatory approvals. Minister Marc Garneau said in a news release issued after the market close that a public interest assessment would be conducted on the deal with input from Canada's competition commissioner.
Consultations will begin on Nov. 4 and involve the air industry and public, among others, as well as an "analysis of the economic benefits or challenges resulting from the proposed transaction," he said.
Garneau said the government had 250 days, or until May 2, 2020, to complete the public interest assessment.
Investors are closely watching the regulatory process surrounding the deal. Transat stock closed down 1.36% on Monday at C$15.97.
AltaCorp analyst Chris Murray said in a recent note he expected the transaction to receive regulatory approval.
Murray said the review by Canadian competition regulators was expected to be "the most strenuous given the overlap of the companies in Montreal and Quebec markets," but he believed "any remediation proposed by regulators to be manageable."
($1 = 1.3275 Canadian dollars)