Proxy firm ISS backs MNG director for Gannett board, rejects two others

By Jessica DiNapoli

(Reuters) - Shareholder advisory firm Institutional Shareholder Services Inc backed a nominee from hedge fund-owned MNG Enterprises Inc for the board of newspaper owner Gannett Co Inc on Thursday, adding a twist in the fight for control of the media company.

Newspaper chain MNG Enterprises, controlled by hedge fund Alden Global Capital LLC, made a $1.36 billion offer to acquire Gannett earlier this year, but has been rebuffed by the publisher of USA Today and scores of other newspapers.

ISS said that support for MNG Enterprises nominee Steven Rossi, former chief executive of MNG, is warranted, but recommended Gannett shareholders withhold votes for Heath Freeman and Dana Needleman. Freeman is the president of Alden and Needleman is a real estate expert.

"This approach will ensure that the Gannett board properly considers MNG's offer and other strategic alternatives, while minimizing downside risk should a deal not materialize, which is a concern given financing and other sources of uncertainty," ISS said in a report.

Gannett said in a prepared statement that Rossi, former chief executive of MNG Enterprises, has "very close ties" to his former employer and Alden that "would prevent him from being able to meaningfully fulfil his duties" as a director. MNG Enterprises Inc owns more than 200 newspapers.

"We firmly believe that ISS has reached the wrong conclusion in failing to recommend that Gannett shareholders vote for all of Gannett's eight highly experienced and fully independent director nominees," the company said in a statement.

Gannett's annual general meeting, when voting results for the board will be counted, is on May 16.

(Reporting by Jessica DiNapoli in New York and Saumya Sibi Joseph in Bengaluru; Editing by Arun Koyyur and Dan Grebler)