TIRE and car parts maker Continental AG yesterday rejected a takeover offer worth some 11.2 billion euros (US$17.8 billion) from smaller rival Schaeffler KG, arguing that it did not reflect Continental‘s full value.

Family-held Schaeffler said in a regulatory filing with the German stock exchange on Tuesday that it was offering 69.37 euros a share for Continental, which has about 161 million outstanding shares.

Continental said its executive board rejected 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," it said in a statement.

Continental‘s rejection came after two days of big gains for its shares after news of Schaeffler‘s interest emerged at the weekend. The shares initially fell yesterday but were up 0.3 percent at 73.70 euros in midday Frankfurt trading.

If the takeover effort is successful, it would make Schaeffler the world‘s biggest auto component maker, putting it ahead of competitors like Robert Bosch GmbH.

Hanover-based Continental said that it was willing to support Schaeffler taking up to 20 percent of the company, but that Schaeffler "insisted on a controlling stake of more than 30 percent."

It accused Herzogenaurach-based Schaeffler of taking advantage of a weak equity market and of securing access to 36 percent of its stock "in an unlawful manner" through derivative positions and collaborating banks.

Continental argued that it has sufficient potential of its own and would not benefit from a tie-up.

Schaeffler said, announcing the takeover offer, that its ultimate aim was a "strategic shareholding" of more than 30 percent - not necessarily a majority.