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Bendigo Rejects Bank of Queensland $2.3 Billion Bid

Australian regional lender Bendigo Bank rejected on Tuesday a A$2.7 billion ($2.3 billion) takeover bid by Bank of Queensland saying the deal does not offer sufficient value and certainty for its shareholders.

Bank of Queensland launched the cash and stock takeover bid last month to potentially create Australia's seventh biggest bank and give muscle to regional banks in the fight against Australia's big four lenders.

"The proposal involves significant risks, including integrating organisations with different business models and philosophies," Bendigo Bank said in a statement.

"The Bendigo Bank Board has concluded that the Bank of Queensland proposal is not in shareholders' best interests," it added.

Bendigo Bank shares lost 6.2% to A$16.88 on the news while Bank of Queensland shares fell 1.9% to A$18.50 in the morning session. The broader market was down 0.5%.

Analysts had raised concerns about the deal since the two banks have different business models.

Bank of Queensland, which was established in 1874 and operates through an owner-managed branch model, was offering 0.748 of its shares and A$5.50 in cash for each Bendigo share.

Bendigo Bank, formed in 1858 to help miners at the Bendigo goldfield buy homes, runs a community banking model and lends predominantly in Victoria state, with some business in New South Wales and Queensland.

Bendigo Bank upgraded its 2007 earnings forecast to cash profit after tax of A$117 million, or cash earnings per share (EPS) growth of 12%. It also set a target cash EPS growth in excess of 12% for 2008.

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