By Sue Zeidler

LOS ANGELES (Reuters) - Entertainment giant BMG said Thursday it was close to making a long-awaited announcement on the future of legendary hitmaker Clive Davis, who turned Arista Records into a major music industry force and home to such stars as Carlos Santana and Whitney Houston.

"BMG and Clive Davis (Arista's president) are still in discussions and an announcement will be made in the near future,'' said Keith Estabrook, a spokesman for BMG, declining to elaborate further. Davis has run Arista for 25 years.

The announcement would end months of speculation over a very public feud between Davis, 67, and the label's German parent Bertelsmann AG .

The battle erupted in November, when BMG chief Strauss Zelnick let it known that he planned to replace Davis as Arista president with rap executive Antonio "L.A.'' Reid. Davis' contract expires in June.

Many of Arista's artists were outraged and pledged support for Davis. BMG then began negotiating with Davis to start a new label to avert a crisis.

Ironically, the showdown took place as Arista posted its best sales figures ever, with $425 million in the first nine months of its fiscal year. The label will celebrate its 25th anniversary with a U.S. television special on May 15th.

Music industry sources said BMG, the $4.6 billion worldwide music and entertainment division of Bertelsmann, is likely to make two separate announcements regarding Arista.

They said the first would be Reid's appointment as new president and chief executive officer of Arista and the second would concern Davis's future and whether he would stay with BMG in some capacity.

"The 'L.A.' Reid announcement is just around the corner,'' said one source familiar with the situation, but added it could be anytime within the next two weeks. A spokesman for Reid said only that discussions between Reid and BMG were continuing.

Another source said a separate statement regarding Davis would be made afterwards. "I've heard the 'L.A.' Reid announcement will be made during the week of May 1 and that Clive will make an announcement shortly afterward,'' the source said.

Davis, meanwhile, has also talked with other labels, like Seagram Co. Ltd.'s Universal Music, Sony Corp.'s Sony Music and Time Warner Inc.'s Warner Music, which is merging with EMI Group Plc .

"He's still weighing offers, but he feels that BMG has turned up the heat,'' one insider said, adding, "They've made him a substantial offer to keep him in the BMG family.''

One source close to BMG denied any firm offers had been made, although another source said that BMG had offered Davis close to $200 million to support a new proposed venture.

Davis was unavailable for comment.

The Arista label, which contributes about a third of BMG's market share, attributed its stellar sales largely to veteran rocker Santana's comeback "Supernatural'' album, which swept the Grammy awards and has now shipped over 16 million copies worldwide.


Reuters/Variety