Year of the merger.

From aerospace to entertainment, consolidation dominated L.A.'s business scene in 1996

With L.A.'s economy rebounding from the recession, local industries in 1996 confronted the C word: Consolidation.

Many of the biggest names in entertainment, banking, health care, aerospace and retailing were involved in huge mergers and acquisitions.

Considering all the job losses that mega-mergers can bring, L.A. fared pretty well.

Some of the latest year-end projections have 3.8 million people employed in the county this year, up slightly from 1995.

One encouraging factor behind the net employment gain was the continued boom in the healthiest and most visible industry: showbiz.

And it was the most visible entertainment company - Burbank-based Walt Disney Co. - that pulled off 1996's most-discussed merger, purchasing Capital Cities/ABC Inc., parent of the ABC television network.

That $19 billion transaction, which was formalized in February, also necessitated Disney's sale of KCAL Channel 9 to Young Broadcasting Inc.

The other media deal generating the most local interest was Time Warner Inc.'s $6.5 billion acquisition of Turner Broadcasting Systems Inc.

Time Warner employs around 9,400 people in L.A. County at such high-profile divisions as the Warner Bros. movie studio and Warner Bros. Records operation in Burbank. Among Turner's 1,600-some local employees are the staffs at Beverly Hills-based New Line Cinema and Castle Rock Entertainment and Hollywood's Hanna-Barbera Cartoons Inc.

The merger is also expected to generate subsequent sales of some of the Turner subsidiaries, with Castle Rock the most likely local property to be sold.

Also generating interest was bidding for the Santa Monica-based studio Metro-Goldwyn-Mayer Inc.

An affiliate of French bank Credit Lyonnais put MGM up for sale in March. Four months later, former MGM owner Kirk Kerkorian had come out on top, heading a team that includes his Tracinda Corp., MGM management and Australian media company Seven Network Ltd.

L.A.'s newest studio also generated a lot of news, but much of it related to Dream-Works SKG's turbulent efforts to develop its headquarters at the massive Playa Vista planned community below the Westchester bluffs.

Here's a rundown of 1996 in other key industries:

* Banking: On April 1, San Francisco's Wells Fargo Bank swallowed up one of L.A.'s most recognizable institutions, First Interstate Bancorp. In late July and early August, Wells closed more than 250 branches across California as it combined the two formerly competing retail networks.

Another L.A. financial giant, California Federal Bank, agreed to a $1.2 billion acquisition by San Francisco-based First Nationwide Bank. That sale, which will likely result in 800 layoffs, is expected to take effect in January.

Predictably, rumors surfaced about other big local banks and thrifts possibly being acquired - with Great Western Bank emerging as a primary subject.

* Health care: In early October, Woodland Hills-based HMO giant Health Systems International announced plans to merge with Foundation Health Corp. - creating an organization serving some 5 million members in more than a dozen states.

The announcement came shortly after Cypress-based PacifiCare Health Systems and Fountain Valley-based FHP International agreed to team up.

Once the two mergers take effect as expected in 1997, 9 million of California's 13 million HMO members will belong to one of the state's three biggest systems.

* Aerospace: In a field that's seen a steady wave of consolidation in recent years, Seattle-based Boeing Corp.'s 1996 moves were particularly noteworthy for L.A.

Boeing hadn't had much of an L.A. presence before 1996, but its acquisition of Rockwell International Corp.'s defense divisions immediately changed that.

Boeing followed up in December with plans to acquire struggling McDonnell Douglas Corp., whose Douglas Aircraft Co. division maintains substantial operations here, mostly in the Long Beach vicinity.

The move left observers anticipating more consolidation - even among the many smaller local subcontractors that serve the industry.

* Retailing: L.A.'s retail landscape changed substantially in 1996 as a result of merger activity - especially in the department store and grocery fields.

In the wake of 1995's acquisition of Broadway Stores Inc. by Federated Department Stores Inc., area malls saw the opening of Federated's Bloomingdale's this year, as well as continued expansion of Federated's Macy's division. Gone are Broadway stores and all but one Bullock's.

Mergers and acquisitions made 1996 headlines in the local grocery trade as well.

Following up Century City-based Yucaipa Cos.' 1995 acquisition of Ralphs Grocery Co., Safeway Inc. made a bid for Arcadia-headquartered Vons Cos. in October. Vons' board accepted the Safeway offer in December - ultimately expanding Oakland-based Safeway into a $22 billion operation.

The deal - which retains the Vons chain's separate identity - is expected to close next spring.

* Trade, transportation: The ports of Long Beach and Los Angeles saw import-export tonnage continue to climb over the year - and both made progress on capital improvement programs aimed at greater capacity and more efficient cargo transfer.

Administrators of both of L.A. County's biggest airports - LAX and Burbank-Glendale-Pasadena - pursued substantial expansion programs as well.

Ongoing disputes during the year among various players in the ambitious Alameda Corridor - the express rail route aimed at speeding up freight between the Los Angeles and Long Beach ports and the downtown L.A. industrial district - have delayed the $2 billion project's construction timetable.

* Real estate: Perhaps the most encouraging story of 1996 was the aggressive return of investment capital. Institutional and offshore investors demonstrated renewed confidence about the future of L.A.'s commercial real estate markets.

While commercial property values haven't caught up with their late 1980s peaks, pricing on a per square foot basis kept climbing.

Reflecting the Westside's steady recovery, institutional investors doled out about $121 million for the Century City North tower, $133 million for Westwood's Saban Plaza and about $230 million for Santa Monica's MGM Plaza.

An investment fund managed by J.P. Morgan & Co. subsidiary is expected to buy the Westside's signature highrise complex - Century City's Century Plaza Towers - for $480 million early in 1997.

Even downtown L.A. saw its first major highrise investment transactions in several years, with an affiliate of an Indonesian conglomerate buying the 801 Tower for $61 million, and a fund managed by Sam Zell's Equity Office group picking up Two California Plaza for around $95 million.

* Pro sports: One of the year's biggest ongoing local business stories revolves around a $200 million-plus public/private development project - a much-needed new sports arena for the L.A. Kings and L.A. Lakers franchises.

The Kings' owners - local real estate tycoon Ed Roski Jr. and Denver businessman Phil Anschutz - have expressed a preference for a downtown L.A. site over an Inglewood alternative.

However, negotiations with L.A. city authorities have dragged on well past the developers' self-imposed deadline for a memorandum of understanding on which a public-private development partnership would be based.

As the year ends, Inglewood is still in the running.