Fabric Chain Tries to Sew Up Takeover : Tender offer: In a move that few companies can afford as the economy softens, a Sherman Oaks retailer aims for greater presence in the Northwest.

While many companies hunker down to face the recession, high-flying House of Fabrics is pursuing an unsolicited, $44-million takeover of another fabric-store chain to expand its business in the Pacific Northwest.

Sherman Oaks-based House of Fabrics, the nation’s largest chain of sewing and fabric stores with 610 outlets in 43 states, last week launched a cash tender offer of $13.50 a share to buy Fabricland, a Portland, Ore.-based concern with 77 stores in Oregon, Washington, Idaho, California, Montana and Arizona.

It’s the kind of strategic move that few companies can afford as the economy softens these days. But House of Fabrics is enjoying strong growth at its existing stores and ample cash flow, and so believes that it can manage the additional debt necessary to buy Fabricland. It already has a tentative agreement from Bank of America for the loan needed to go ahead with the takeover.

House of Fabrics had said last month that it hoped to negotiate a friendly merger with Fabricland and, on Jan. 7, the presidents of both companies met in Portland. But they failed to reach agreement.

So House of Fabrics began its tender offer, in which it appealed directly to Fabricland’s stockholders to sell their stock. That automatically placed more pressure on Fabricland’s management to negotiate a merger or find a defensive alternative.

Why did House of Fabrics press ahead? Gary L. Larkins, House of Fabrics’ president, said Fabricland “is a good strategic fit” because “we’ve been looking at the Northwest for some time.” House of Fabrics has only a few stores in that area.

Fabricland also has large-scale stores, similar to the “super stores” that House of Fabrics has been opening to replace its less-profitable, smaller outlets in shopping malls, Larkins said. That shift in store size has been largely responsible for boosting House of Fabrics’ recent earnings.

In the nine months that ended Oct. 31, its profit jumped 37% from a year earlier, to $7.38 million, and its sales climbed 10% to $278.1 million. The company’s business is expected to keep flourishing in a recession, under the premise that more people will make or repair their clothes and home decorations rather than buy new ones.

The company’s stock, which was hitting new yearly highs in November while the overall market struggled to stay even, closed Monday at $28.75 a share on the New York Stock Exchange, up 65% from its $17.375 level at the start of 1990. Fabricland’s stock closed at $12.875 a share in over-the-counter trading.

Larkins said House of Fabrics has “had lots of discussions with Fabricland over the years” regarding a possible merger.

But Fabricland has not signaled that it is interested in selling. Last week, the company’s directors began evaluating House of Fabrics’ tender offer, and the board’s formal response is expected within a week. For now, Fabricland urged its stockholders not to tender.