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KFGO, sister stations deal worth $25 million

FARGO - Midwest Communications will pay $25 million for KFGO and the five other local stations that make up Radio Fargo-Moorhead, according to a purchase agreement filed with the Federal Communications Commission.

Radio Fargo-Moorhead owner Jim Ingstad is selling the stations for $11 million more than he paid when he bought them back from Clear Channel Communications in 2006, after having sold them to Clear Channel six years earlier for $46.5 million.

The deal announced last week is pending FCC approval.

Midwest Communications operates 47 radio stations in Illinois, Indiana, Michigan, Minnesota and Wisconsin. The Green Bay, Wis.-based company expects to take control of the Fargo-area cluster of stations late this year.

Ingstad did not return phone messages seeking comment Wednesday. Midwest President Duke Wright was out of the office and could not be reached for comment.

The wide variance in the sale prices of the stations since 2000 isn't unique to Radio Fargo-Moorhead.

Tom Kay, a radio industry watcher and executive director of the Conclave, a Minneapolis-based nonprofit that aims to improve the quality of broadcasting to better the serve the public interest, stated in an email interview that consolidation was stampeding in 2000 as companies raced to grab as many stations as they could because Wall Street valuations were based on how many stations a company owned, not just their profitability.

"Crazy multiples were at play," Kay wrote, referring to the price paid for stations based on multiplying a station's revenue by a certain number.

By 2006, Clear Channel seemed to be paring itself of smaller properties to raise cash to pay down the debt it accrued during the feeding frenzy, while also focusing on what it believed were more profitable properties in larger markets, Kay said.

"Problem was, by that time stations were in the process of being devalued as those same Wall Street folks began to demand return on investment ... which those expensive properties like the Fargo-Moorhead group weren't (apparently) providing," Kay wrote. "Jim sold his stations for arguably more than they were worth at the time in 2000, and bought them back for (again, arguably) less than they may have been worth in 2006.

"The Midwest deal likely represents a transfer at a price determined by a more sane multiple ... probably one that is closer to what the industry is currently trading at, although I'm not aware of what that multiple is," said Kay, who wrote about the deal last week in his online newsletter, the Main Street Tattler.

In addition to Radio Fargo-Moorhead's flagship station KFGO, the other stations being sold are BOB 95 FM, Y94 FM, 104.7 Popster FM, 101.9 Talk FM, and 740 The FAN.