Frankfurt  - The board of giant German tyre maker Continental AG rejected Wednesday an 11.3-billion-euro (18-billion-dollar) takeover bid launched by bearings manufacturer Schaeffler but called for talks with the family-owned company.

Following a crisis meeting of the company's board, Hanover-based Continental said Schaeffler's offer price of 70.12 euros a share was not appropriate.

But Continental said it would now seek out talks with the Bavarian-based Schaeffler group which is owned by billionaire Maria-Elisabeth Schaeffler and her son.

Last week the chief of Europe's biggest carmaker Volkswagen AG lent his support to a merger between Schaeffler and Continental, which is also a leading braking system manufacturer.

Martin Winterkorn said a merger between the two companies would be "altogether positive."

Schaeffler this week raised its bid to 70.12 euros per share after being advised by German financial market regulator BaFin that it must at least offer the three-month average of Continental's share price.

A Schaeffler offer last week of 69.37 euros cash was disparaged by Continental management as not reflecting the group's full value.

Continental is nearly three times the size of Schaeffler Group.

However, a slump in the car industry combined with an 11-billion- euro acquisition last year has helped to drive down Continental's shares, leaving the group exposed to takeover.

Schaeffler said last week it had secured the rights to about 36 per cent of Continental's shares. If Schaeffler's offer succeeds, the two companies will have a combined turnover of about 33 billion dollars. (dpa)