Mumbai: Continental AG, the world's fourth-largest tyremaker, is in talks with a German family-owned ball bearings maker Schaeffler-Gruppe, in what could lead to a 10 billion euro ($19 billion) sale of the European tyremaker, the Financial Times Deutschland reported, citing sources close to the development.

Reports citing sources said the companies have been in talks for some time and Schaeffler, based in Herzogenaurach, Germany, has secured the necessary financing.
Schaeffler, the report said, is also willing to make a hostile bid if Continental rejects its offer of talks.

Hartmut Meine, a member of Continental's supervisory board and representative of Germany's biggest industrial union, however, said the union would oppose any attempted takeover by Schaeffler.

Continental acknowledged ''one brief conversation about a possible engagement by Schaeffler Group in Continental AG took place at the end of last week," but did not give details.

"As soon as Schaeffler Group has substantiated its plans, the management board of Continental AG will evaluate these and communicate its views in due course," the statement added.

Schaeffler plans to take Continental private and is prepared to offer shareholders ``slightly more'' than 10 billion euros and assume 11 billion euros of debt, a report said, citing unidentified individuals.

Schaeffler would consider spinning off Continental's tyre business to help finance the transaction, the report said.

Continental, one of Europe's top five auto-industry suppliers, had acquired a Siemens AG's VDO car-parts unit for 11.4 billion euros, in December. The acquisition brought Continental on a par with some of the top auto parts makers like Robert Bosch GmbH.

While the acquisition of the Siemens' unit pushed Continentals' first-quarter net interest expenses to 206.8 million euros from 16.6 million euros a year earlier, its profit in the period dropped 38 per cent.

Continental, which supplies tyres, brakes, transmissions, and dashboards, employs over 153,000 people and generated 16.6 billion euros in 2007 sales. Continental is facing a squeeze on margins as raw material costs rise and business shrinks.

Schaeffler, which supplied the bearings for the robotic arm of the Phoenix research probe to Mars, had 66,000 employees worldwide and generated 8.9 billion euros in revenue last year, according to its website.

Royal Bank of Scotland Group Plc is the lead financier for Schaeffler, the Financial Times reported, citing unidentified sources.