French water and waste management groups Suez Environnement and Veolia Environnement on Saturday issued separate statements denying a press report they were working on any sort to tie-up.

According to the Le Monde newspaper, talks between the two firms over a possible tie-up were broken off about 10 days ago, with "the two groups judging the operation too risky".

"Suez Environnement denies rumours it is working on a tie-up with Veolia," Suez said in a statement.

"In response to market rumours, a tie-up with Suez Environnment is not on the agenda," Veolia said in its own statement.

A source close to the matter told AFP on Friday that discussions had occurred, but said a tie-up would require one of the groups to sell its French operations to respect competition rules.

Le Monde said Suez head Jean-Louis Chaussade in August contacted Antoine Frerot, the Veolia chief, to propose a "a friendly tie-up", and several working meetings took place in September, with investment banking representatives taking part.