No good merger goes unpunished.

 

Naturally, larger business deals – especially mergers or acquisitions – that involve millions or even billions of dollars face far more resistance, red tape and legal issues than smaller ones. (Consider Sprint Nextel and Clearwire Corp.’s recently stalled efforts to bring high-speed mobile Internet service based on WiMAX (News - Alert) technology to a large swath of the Midwest.)

 

Earlier this month, many TV watchers cheered when the company that owns a majority stake in DirecTV Group Inc. laid out a plan that would deliver more control of operations to broadcast media mogul John Malone, by combining the digital satellite TV service with its own entertainment group and spin both of them off into a new entity.

 

It’s a deal that seemed to make sense and that would benefit viewers.

 

Officials with the parent group, Liberty Media Corporation, conceded that merging DirecTV (News - Alert) with Liberty Entertainment also will help El Segundo, California-based DirecTV’s shareholders by adding key assets – namely, Game Show Network, FUN Technologies and three regional sports networks.

 

It also made sense given Malone’s industry pedigree. Currently the chairman of Liberty Media and chief executive officer of Discovery Holding Company, Malone is a former director of the National Cable & Telecommunications Association who spent the bulk of his career as president and chief executive officer of Tele-Communications Inc.

 

Yet we now learn from our esteemed colleagues at the Associated Press that a pair of pension funds are suing DirecTV and Liberty over the plans.

 

“The Key West Police and Fire Pension Fund in Florida and City of Roseville Employees’ Retirement System in Michigan filed the lawsuit on Tuesday in the Chancery Court in Delaware,” the AP reports.

 

Specifically, the pension funds say DirecTV shareholders are overpaying for assets it will get from the entertainment unit. They also said the deal’s “unreasonable” $450 million breakup fee, plus up to another $10 million in expenses, would deter other potential bidders, according to the suit.

 

Yet, to help service Liberty Entertainment’s debt, DirecTV said originally that it would provide it with up to $650 million in funding. Class A shareholders of the new unit are entitled to one vote per share, while Class B (News - Alert) stockholders will be entitled to 15 votes per share, the companies said.

 

Originally, Liberty and DirecTV said they expected to close their deal by the end of this year. It isn’t clear how the pension funds’ suit will affect those plans. Check back in with TMCnet for developments.