Schaeffler, in a statement on Sunday, welcomed Continental’s readiness to negotiate but did not back down from its position.

"The objective pursued by Schaeffler to be a strategic major shareholder in Continental and to acquire for that purpose more than 30 percent of the shares remains unchanged," it said.

"This strategic participation is necessary to achieve a stable shareholder structure at Continental that will enable us to implement our targets and thereby secure our investment in the company for the longer term," Schaeffler said.

The statement did not say what those targets are.

NO BREAK-UP

Schaeffler said the 20 percent stake proposed by Wennemer would not be strategic but a pure financial investment which the family business could not justify,

Schaeffler reiterated its approach was not intended to lead to a break-up of Continental. The 69.37-euros-per-share (55 pounds) offer was appropriate, Schaeffler said, adding it expected Continental shareholders to find it interesting.

Continental’s share closed at 71.97 euros in Frankfurt on Friday -- valuing the group’s equity at 11.5 billion euros -- having traded between 64.10 and 75.55 euros since news of Schaeffler’s approach broke a week ago.

Wennemer is expected to unveil his defence against Schaeffler at a meeting of Continental’s supervisory board on Wednesday.

It remains unclear whether he has the support of board chairman Hubertus von Gruenberg who has worked with Schaeffler boss Juergen Geissinger. A Continental source told Reuters on Thursday that von Gruenberg saw little hope of the group defending itself successfully against Schaeffler.

The weekend edition of the Financial Times reported a "massive split" at the top of Continental.

A Schaeffler takeover of Continental would mark the first time a German family business has acquired a company in Frankfurt’s blue-chip DAX stock market index <.GDAXI>.

(Reporting by Peter Starck; Editing by Richard Hubbard)