FRANKFURT, May 26 (Reuters) - Arcandor (AROG.DE) said on Tuesday 26 May talks with rival Metro (MEOG.DE) about a tie-up of their department store chains were still on, pouring cold water on speculation it had walked away from a possible deal.

Photo: REUTERS/Michael Dalder

The two companies were trying to set a new date after Arcandor cancelled plans to meet this week as the German government was due to discuss Arcandor's call for state support in the coming days, a spokesman for Arcandor said.

Metro confirmed that the top-level meeting was called off.

German newspaper Financial Times Deutschland had reported earlier that the two companies had abandoned talks.

Arcandor and Metro kicked off talks last week to sound out a possible combination of their department store chains, which Metro had proposed to fend off state support for its rival, a step it says would distort competition.

Arcandor has turned to the government for help, warning it could go bust within weeks if it does not get more than $1 billion in state aid. It has long struggled to break even and has been dragged deeper into crisis by the global recession.

Arcandor shares, which fell more than 25 percent in the previous session on fears the government would not come to the rescue, were down 2.8 percent at 1.72 euros by 0851 GMT. Metro shares were down 0.9 percent at 36.05 euros, outperforming a 1.5 percent drop in Germany's blue-chip DAX index .GDAXI.

(Reporting by Eva Kuehnen; editing by John Stonestreet)