* Offer price is 19% premium to Friday's closing price

* DCM would expand presence in Tokyo region

* Shimachu supports takeover offer

* Tender offer runs until Nov. 16

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TOKYO, Oct 2 (Reuters) - Japanese home improvement retailer DCM Holdings said on Friday it has made an offer for smaller rival Shimachu Co for 164 billion yen ($1.6 billion), which would give it a greater presence in the Tokyo region.

DCM said it would seek to buy all the shares of Shimachu through a tender offer at 4,200 yen per share, a 19% premium to Friday's closing price. Shimachu said it would support DCM's offer as it would gain synergies by being acquired.

Buying Shimachu would give DCM bigger scale in a difficult retail environment.

"Our business outlook is unclear and severe," DCM said in a statement. "Consumption has lost momentum and it could be hurt further because of the government requests for limiting outings and business closures."

Japan is bracing for its worst post-World War II recession after lockdown measures keep some businesses shut and have depressed consumer spending. The unemployment rate rose to its highest in over three years in August.

DCM operates 677 outlets nationwide under various affiliates, while Shimachu has about 60 outlets mainly in the greater Tokyo region, according to the two companies.

The tender offer will run from Monday through Nov. 16.

($1 = 105.0700 yen) (Reporting by Chris Gallagher and Junko Fujita; Editing by Muralikumar Anantharaman and Susan Fenton)