FRANKFURT (Reuters) –

Continental (CONG.DE) is considering

buying a peer company as part of its defense against a hostile

11.3 billion euro ($17 billion) bid from Schaeffler Group, the

Financial Times reported on Saturday.

The paper quoted people close to the situation as saying

Continental was in “concrete talks” with several listed and

unlisted international rivals about a possible

multi-billion-euro deal.

It said any deal, which would be structured as an all-share

bid, was likely to be funded via a capital increase of about 20

percent, which would be worth more than 2 billion euros.

Schaeffler, an automotive supplier, holds 8 percent of

Continental shares and has access to a further 28 percent

stake, secured by Merrill Lynch using cash swaps.

A Continental spokesman declined to comment.

Earlier this month, Schaeffler warned Continental not to

resort to a big capital increase as a way to fend off its bid.

(Reporting by Mantik Kusjanto; editing by David Stamp)