UPDATE 1-Deutsche Boerse seeks state investor-report

* Boerse talks to state of Hesse, KfW about stake -magazine

* Aim is to help ward off activist investors -magazine

* KfW says not in talks

* Deutsche Boerse declines comment on market rumours

(Adds Deutsche Boerse comment, detail, background)

FRANKFURT, Sept 24 (Reuters) - German stock market operator Deutsche Boerse (DB1Gn.DE) is in talks to bring in the state as a long-term "anchor" investor in the group, following protracted battles with hedge funds, a magazine reported on Thursday.

Boerse is holding preliminary talks with its home state of Hesse and government development bank KfW [KFW.UL] that could lead to each taking a stake of 5 percent in the exchange operator, Germany's Manager Magazin cited financial sources as saying in a story released ahead of publication on Friday.

A 5 percent stake amounts to around 564 million euros ($830.6 million), based on Thursday's closing share price of 57.85 euros.

A financial source told Reuters that Deutsche Boerse is looking for an anchor investor but gave no details.

KfW on Thursday denied that it was in talks.

Deutsche Boerse said it does not comment on market rumours about its shareholder structure but said it was one of the few listed companies with a 100 percent free float.

"The company is attractive for a broad and international range of investors," it said in a statement.

Deutsche Boerse fought a long-running battle with activist investors such as The Children's Investment Fund (TCI) and Atticus Capital LP, which earlier this year sold most of their stakes in the exchange.

At the peak of their power, the two hedge funds had controlled nearly 20 percent of Deutsche Boerse's shares, forcing the company to drop its takeover effort for the London Stock Exchange (LSE.L) and ousting Boerse's then chief executive and chairman.