HANNOVER (Thomson Financial) -- German automotive supplier Continental said it is recommending to shareholders to reject rival Schaeffler's 70.12 euro per share hostile takeover offer but said the company will continue negotiations with the latter.
A company statement said the 70.12 euro/share cash offer is "inadequate from a financial point of view" and does not reflect the long-term value potential of the company.
Continental CEO Manfred Wennemer told reporters after a supervisory board meeting on Wednesday that his company remains open for more talks.
Wennemer declined to give any details about the discussions and refused to comment on a newspaper report that Schaeffler was prepared to raise its cash offer to 75 euros a share.
Continental supervisory board vice chairman Werner Bischoff -- who represents the trade union IG BCE for mining, chemicals and energy industries -- for business strategic reasons, it is "not appropriate to pursue a pure defence policy" in tackling the Schaeffler takeover offer.
"If the Schaeffler engagement strategically makes sense, then the size of the shareholding cannot be the only focus but a lot also depends on discussing reasonably the conditions and modalities of a shareholding," Bischoff said in a statement.
Bischoff said the chances must be used to discuss these aspects.
He also said Schaeffler needs to clarify its exact shareholding in the company, but that he expects the current shareholding it has on the car tire maker is already sufficient to have a representation on the supervisory board.
Bearings-maker Schaeffler has said it controls a 36 percent stake in Continental directly and indirectly.
Continental's statement Wednesday said that during the supervisory board meeting, the executive board presented an update on the talks held with Schaeffler and the progress made so far.
"The Executive Board will continue its negotiations in the short-term with the full backing of the Supervisory Board," it said.
"Continental has the goal of reaching a solution to the benefit of the company as soon as possible. The Executive Board continues to evaluate all options of action with the full support of the
Supervisory Board," the statement said.
It said one of the reasons the Executive Board and the Supervisory Board are dismissive of Schaeffler's offer was that in case of a takeover, tax disadvantages and increased refinancing costs are likely to arise.
It said the economic advantages presented by a merger with Schaeffler are "limited".
"There is the potential to leverage synergies primarily in the production of transmissions and, in the future, in the field of hybrid technology," it said, adding that development partnerships in these areas already exist with other companies.