Fabricland Says Yes to Rival’s Sweetened Bid : Takeover: House of Fabric raises offer from $13.50 a share in cash to $17.50 worth of the larger firm’s stock.
Fabricland Inc. accepted a sweetened $55-million takeover offer from its larger rival, House of Fabrics Inc., the companies announced Monday.
The agreement came after Sherman Oaks-based House of Fabrics raised its bid from a cash offer of $13.50 a share, or $43 million, to a stock swap in which Fabricland shareholders are to receive $17.25 worth of House of Fabrics stock for each of their existing shares.
House of Fabrics is the nation’s largest chain of stores providing fabrics and sewing notions, with 602 outlets in 43 states and sales of $393.5 million for the fiscal year ended Jan. 31. Fabricland, based in Portland, Ore., operates 77 stores in the West and had sales of $81.1 million in its fiscal year ended June 30.
After the agreement was announced, Fabricland’s stock closed at $16.375 a share, up $1.75, in national over-the-counter trading. House of Fabrics’ stock fell $1.50 to $37.125 a share in New York Stock Exchange composite trading.
House of Fabrics launched its unsolicited takeover bid in January with a $13.50-a-share tender offer, which Fabricland rejected as inadequate. After House of Fabrics mounted an effort to unseat Fabricland’s directors, Fabricland agreed to negotiate a possible merger.
In an interview Monday, House of Fabrics President Gary Larkins said his firm raised its offer after evaluating additional information provided by Fabricland and in light of “substantial sales increases” that Fabricland is enjoying.
He said that Fabricland stores would retain that name and that Fabricland’s top management has been asked to stay. Asked if employee cutbacks were planned after the merger, Larkins said that could not be decided “until we’ve had a chance to look at their operations.”
He noted, however, that Fabricland has the highest annual per-store sales volume--more than $1 million--of any fabric chain in the nation, including House of Fabrics.
Although the merger was approved by both companies’ directors, it is subject to a vote of the companies’ stockholders. Fabricland also has the option of canceling the deal if the average price of House of Fabrics’ stock drops below $27.50 a share in the 15 days preceding the merger.
House of Fabrics has a 2-for-1 stock split that will be awarded April 30 to holders of record April 9. The company said the exchange ratio for the Fabricland merger would be adjusted to account for the split.
