Rhodia, the French chemicals company, on Tuesday said it was launching a €604m ($709m) rights issue to pay down debt and finance development projects.

The company, whose shares have been boosted in recent months on the back of takeover speculation, said it planned to issue 539,134,383 new shares with a par value of €1 each.

Shareholders will get one preferential subscription right for each existing share held and 8 preferential subscription rights will entitle them to subscribe to 7 new shares at €1.10 per new share.

Rhodia said it was “on track to meet its objectives of securing medium-term financial resources, refocusing the business portfolio, simplifying its structure and improving operational performance.”

Jean-Pierre Clamadieu, chief executive, said: “This rights issue will enable us to build our future. Largely restructured, refocused and holding global leadership positions, Rhodia today is ready to develop successfully in its chosen areas of activity.”

Rhodia was centre of speculation that it could be a takeover target for a company such as Germany’s BASF in October.

But analysts at the time said that a takeover was unlikely while Rhodia was still restructuring and struggling to break a three-year loss making streak. The heavily indebted company has been forced to sell several businesses and cut hundreds of jobs to avoid financial meltdown

Europe’s speciality chemicals companies have face a number of pressures. Hampered by soaring oil prices their margins have been squeezed, while the cost of crucial raw materials has rocketed and big customers in foods or cosmetics have fought against price rises.

Rhodia’s issue is fully underwritten by a banking syndicate led by BNP Paribas and Credit Suisse First Boston, with Calyon and HSBC acting as joint lead underwriters.

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