Danone, the world's biggest yoghurt maker, plans to launch a rights issue to raise €3bn ($4.2bn) to reduce its net debt and give it the flexibility to make bolt-on acquisitions.

The Paris-based group, which made net profits of €1.3bn in 2008, has been hit by the downturn in consumer spending, saying in February it expected no rebound in consumption this year.

Its sales of bottled water – including Evian and Badoit – are falling in western Europe and it is also battling declines in its dairy product sales.

But Danone, which made the announcement after Monday's market close, stuck to its full-year target of 10 per cent growth in earnings per share in constant currency terms.

The details of the rights issue will be announced this week. Danone said existing shareholders would have preferential subscription rights.

The group, saddled with €11bn of debt after its 2007 purchase of Numico, the Dutch food maker for €12.3bn, is known to want to reduce its leverage of three times earnings before interest, tax, depreciation and amortisation to the average for the agricultural food industry of 1.5 times.

Its debt will fall to 1.7 times after the rights issue and should prevent the company from having to make firesale disposals of non-strategic businesses.

Danone said the funds raised would be used “to strengthen its capital structure, reduce its financial leverage and improve its credit metrics”.

The money would also enable the group to “increase its financial and strategic flexibility . . . and finance potential add-on acquisitions”.

The advisers are JPMorgan and Calyon, the investment banking arm of Credit Agricole.