Mumbai: German tyre and auto components manufacturer Continental Corporation has rejected a €11.2 billion ($17.8 billion) takeover offer by the Schaeffler Group, saying the offer does not come close to the true value of Continental and lacks a convincing strategy.

On Tuesday, the Schaeffler Group informed Continental AG of its decision to make a takeover offer for the company at €69.37 per share in cash, valuing Continental at €11.2 billion.

''The executive board of Continental rejects the offer. The offer is highly opportunistic, does not come close to the true value of Continental, does not create trust and lacks a convincing strategic rationale,'' the company said in a website release.

If the family-owned ball-bearing Schaeffler succeeds in acquiring the Hanover-based group, which is three times its size, it would be the first time a German family has taken over a company listed in the country's blue-chip DAX index.

Late on Tuesday, Schaeffler, owned by German billionaire Maria-Elisabeth Schaeffler,  announced the terms of its offer and said it did not intend to break up Continental or slash jobs and that the two firms were a good fit.

Continental has appointed Goldman Sachs to advise it on a defence.

The Schaeffler Group has taken advantage of a lean market to unlawfully acquire 36 per cent of Continental's outstanding shares – without paying any premium to the shareholders - according to Continental.

''The Schaeffler Group has secured access to 36 per cent of the outstanding capital of Continental in an unlawful manner – with the help of derivative positions and collaborating banks. This would result in a comfortable voting majority at the shareholders meeting and may even lead to a qualified voting majority,'' the website release said.

''The public statements that the Schaeffler Group only aims to achieve a minority position and intends to leave the sound structure of Continental unchanged, are doubtful in light of the recent talks. The executive board of Continental therefore views the approach of the Schaeffler group as not in the interest of the company and its shareholders,'' it added.

Continental said the board was willing to discuss a 20 per cent stake as a long-term investment, but the Schaeffler Group insisted on a controlling stake of more than 30 per cent.

The company also said a closer collaboration of both companies are expected to yield very little strategic benefits. While Schaeffler would benefit from Continental, Continental, which is a standalone company, does not in no way stand to benefit from a potential collaboration.

Continental said it has to take into consideration the interests of the company, its shareholders, employees and business partners while opining on the offer in the context of the legally required response.

With supplies of automotive parts, including brake systems, powertrain and chassis systems and components, instrumentation, infotainment solutions, vehicle electronics, tyres and engineering elastomers worldwide, Continental has targeted over €26.4 billion in 2008 sales.

Continental Corporation is one of the top automotive suppliers worldwide, employing approximately 150,000 staff at almost 200 locations in 36 countries.
 
Continental was built through a series of acquisitions of high-tech car parts makers, bought with money earned from its tyres business.

The company, which had to borrow heavily to pay for its roughly €11 billion purchase of VDO - which makes the technology inside satellite navigation and fuel injection systems - now faces a slowdown in car buying as high oil prices bite.