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Nextel Stock Pays Off for Legg Mason Fund

By Jerry Knight
The Washington Post
Monday, December 20, 2004; Page E01

The merger of Nextel and Sprint is producing handsome returns for Washington investors and Baltimore's best-known money manager.

Now approaching $30 a share, Nextel Communications Inc. stock could be bought for less than $3 in July 2002. Nextel shareholders are scheduled to get Sprint Corp. shares and a little cash for a total value of $32.50 a share if and when the merger is completed next year.

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The recovery was producing multimillion-dollar paydays for Nextel insiders even before the announcement of the deal started bumping the share price still higher. Over the past few months, insiders have been methodically cashing in options they received when the stock was in the $5-a-share range.

Chief executive Timothy M. Donahue has been the biggest seller, netting almost $29 million by disposing of nearly 1.3 million shares. Donahue acquired his stock via options for $5.03 and $5.35 a share and sold them for $24 to just under $29, according to reports compiled by Thomson Financial.

Donahue and other Nextel insiders hold options to buy millions more shares that they can cash in when the Sprint merger is completed.

One of the biggest winners, though, isn't an insider: Baltimore's Legg Mason Value Trust, the mutual fund managed by William H. Miller III, who has beat the benchmark Standard & Poor's 500-stock index for 13 years in a row.

Legg Mason Value Trust owns 44 million shares of Nextel, worth more than $1 billion, reports to investors show. Almost 67 million more Nextel shares are owned by other mutual funds and investment accounts affiliated with the big Baltimore investment firm, according to Bloomberg.

As best as can be determined from public records -- which can be several weeks out of date -- Legg Mason affiliates are Nextel's second-largest stockholder with more than 111 million shares, just behind the 115 million owned by the Fidelity Investments mutual fund family.

Nextel is the biggest single investment in Legg Mason Value Fund's portfolio and may be Miller's best hope of outperforming the S&P 500 for a 14th straight year.

A Legg Mason spokesman said Miller and his managers would not discuss the investment in Nextel.

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