THE Bank of Queensland (BOQ) is seeking a merge with Bendigo Bank through a scheme of arrangement.

The proposal - which requires the support of Bendigo's board of directors and shareholders - is yet to be endorsed by the Bendigo board.

Bank of Queensland managing director David Liddy says the proposal has been driven by 'logic and rationale' for shareholders from both banks.

"Bendigo Bank shareholders are being offered an attractive, up-front premium of 25 per cent on a one-month VWAP, through a combination of cash and shares that will also allow Bendigo Bank shareholders to participate in the future growth benefits of the enlarged group," he says.

"BOQ shareholders will own approximately 60 per cent of the merged company, which will bring together two complementary branch banking business models - one franchised-based, the other community-based - while providing scale efficiencies and improved growth opportunities for both.

"We believe this merger is important for the future of banking in Australia and particularly regional banking. The financial services sector is changing and we want to work with Bendigo Bank to become a 'big small bank' and a sustainable alternative for the Australian public - another step towards becoming 'the other bank."

Under the proposal, Bendigo Bank shareholders will receive 0.748 BOQ shares and $5.50 for each Bendigo share. Based on BOQ's closing share price of $16.60 on March 16, the proposal is equivalent to $17.92 per Bendigo Bank share - representing a 36 per cent premium to the closing price of Bendigo Bank shares as at March 16.

Mr Liddy says no Bendigo Community Bank branches or BOQ owner-managed branches will be closed under the scheme and the company will continue to open branches under the proposed models.

The combined bank would have a branch presence iof more than 575 nationally, putting it well ahead of St George and Suncorp and making it broadly comparable with the big banks.

"We would also have a national business banking presence, the fastest growing equipment finance company in Australia, the largest ATM fleet of any bank in the country, a strong presence in metropolitan, regional and rural Australia, excellent alliances, a powerful wealth management offering, an expanded product range and customer offering and the two highest customer satisfaction brands in Australian banking," says Mr Liddy.