UPDATE 1-Schaeffler repeats aim for over 30 pct of Continental

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FRANKFURT, July 20 (Reuters) - The little known family business behind what may be Europe's biggest takeover this year vowed on Sunday not to settle for the 20 percent stake offered by its prey -- German tyre-to-brakes maker Continental AG.

German ball-bearings maker Schaeffler's out-of-the-blue $18 billion takeover bid for three-times-bigger Continental (CONG.DE: Quote, Profile, Research, Stock Buzz) could create an automotive supplier rival to world No. 2 Robert Bosch [ROBG.UL], also of Germany, if successful.

Taken completely by surprise by Schaeffler, which managed to circumvent rules requiring investors to flag stakes exceeding or falling below certain levels starting at 3 percent, Continental said it would welcome a Schaeffler holding of up to 20 percent.

Continental Chief Executive Manfred Wennemer -- no stranger to takeovers himself, having acquired high-tech electronics units to complement the formerly tyres-only business -- called in weekend newspaper interviews for Schaeffler to engage in talks to reach an amicable solution.

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.  Continued...