House of Fabrics Rejects Merger Offer by Hancock

Hancock Fabrics Inc. on Friday dropped out of negotiations to buy rival House of Fabrics Inc. after the Sherman Oaks-based retail chain--foundering under Chapter 11 bankruptcy protection--rejected Hancock’s purchase price.

“We had an amount in mind and it was obviously not the figure they had in mind,” said Larry Fair, Hancock Fabrics’ controller. It’s possible that the companies may decide reopen merger talks, he added.

Hancock Fabrics, based in Tupelo, Miss., with 505 retail fabric stores in 33 states, was considered a good choice by analysts to help revive House of Fabrics when the acquisition talks began two months ago.

House of Fabrics filed for Chapter 11 in November 1994 and has been closing poorly performing stores and trimming staff in hopes of emerging from bankruptcy protection by mid-January.

The company currently operates 361 stores, down from 624 stores in mid-1994.

The company opened its first store in Los Angeles in 1946 and grew steadily until the late 1980s. But its ambitious move this decade into “super stores” was poorly timed, given the recession and because the fabric retailing industry is intensely competitive and overcrowded with rival stores.

House of Fabrics executives were not available for comment Friday.

Hancock shares fell 37.5 cents on Friday to close at $9, while House of Fabrics shares fell 3.1 cents to 37.5 cents, both trading on the New York Stock Exchange.