* Shares in Veolia, Suez close up 4.3 pct, 7.1 pct
* Companies say they are not studying an alliance
* Exane study says antitrust issues could be solved with IPO (Adds further details on Exane report)
PARIS, April 16 French waste management and water companies Veolia Environnement and Suez Environnement both denied on Wednesday that they are in talks about merging or even considering such a move.
Shares in Veolia closed 4.3 percent higher and Suez closed 7.1 percent higher following an Exane BNP Paribas research report which said the "stars are aligned" for the French waste and water companies to revisit the idea of merging. The trading volume in Suez shares was the second highest in more than a year.
"There are no talks ongoing and there is no project for an alliance. The speculation on the bourse is based on nothing," a Veolia spokesman said.
A spokesman for Suez also denied alliance plans. "Two years ago we held talks, which were broken off. Today, the project is definitely not on the agenda," he said.
In a 40-page study, Exane said that much had changed in the two years since the two firms briefly discussed a merger and dropped the plan over antitrust concerns.
Antitrust issues affect only about 12 percent of combined core earnings, are concentrated in France and could possibly be solved with an IPO of Suez's stable water business, Exane said.
Exane said that the disposals that would be required in a Veolia-Suez tie-up would be similar to those in the Holcim - Lafarge talks in terms of accounting for about 10-12 percent of core earnings.
Exane added it could also see French public financial institution CDC swapping its minority stakes in Veolia and Suez for a stake in Veolia France Water.
"We see up to 60 percent valuation upside from synergies in a bull scenario, while leverage should be reduced sharply, providing scope for further consolidation and/or improved shareholder remuneration," the Exane analysts said.
They said a deal could appease key shareholders at Veolia following a recent leadership challenge to Chief Executive Antoine Frerot.
Exane also suggested that GDF Suez could swap part of its 35 percent Suez stake for Veolia's energy unit Dalkia International, which it said could be a perfect exit ticket for GDF and reinforce its energy services division Cofely.
Exane upgraded its rating on Suez shares to "outperform" from "neutral" with a target price of 17.5 euros and its rating on Veolia to "neutral" from "underperform" with a target price of 15 euros. (Reporting by Geert De Clercq; Editing by Anthony Barker, Greg Mahlich)