UPDATE: Iberia Top Holder: Deal With BA Can Close Soon

British Airways PLC (BAY.LN) and Iberia Lineas Aereas De Espana SA (IBLA.MC) are close to a final agreement over the planned merger of the two airlines that may give Iberia a bigger piece of the company than initially expected, a top Iberia shareholder said Monday.

"At Iberia's board meeting last week, we concluded that a deal is close," said Miguel Blesa, chairman of Caja Madrid, Iberia's main shareholder. "I think we have all the data we need to make a decision," Blesa told a reporters at a press conference to present results. The unlisted Madrid-based savings bank owns 23% of Iberia.

At 1503 GMT, Iberia shares were up EUR0.06, or 3.3%, to EUR1.87. British Airways was down 2 pence, or 1.8%, to 118 pence.

Blesa, who is also vice chairman of Iberia, said he thought that Iberia's share in the resulting company could be closer to 45% than to 40%.

"Frankly, I don't think that we're talking about (a swap formula) of 60% (for BA's shareholders) to 40% (for Iberia's owners)," he said, noting that Iberia's market capitalization is now bigger than that of its U.K. peer.

Blesa also said the airlines are basically in agreement on splitting the board 50-50 between them, while they have yet to decide on a headquarters for the combined company.

"We haven't said headquarters should be in Madrid, but British has said that it would like it to be in London," Blesa said. Blesa said he wished for an agreement that would put the legal and fiscal headquarters in one country, and the operating headquarters in the other country.

The two carriers revealed a GBP3.16 billion all-share merger in July, with tie-up terms still to be set.

However, BA's GBP1.74 billion pension-fund deficit and its recent share-price drop have made an agreement on the fine print of the deal more complicated than initially expected.

Iberia has no debt and EUR2.25 billion in cash - a position that could allow it to leverage a larger stake in the merged entity.

Company Web site: www.cajamadrid.es

-By Christopher Bjork, Dow Jones Newswires; 34 91 395 81 23; christopher.bjork@dowjones.com