By Svea Herbst-Bayliss and Dawn Chmielewski

NEW YORK (Reuters) -With less than a week to go before shareholders elect Walt Disney (NYSE:)’s board the race for votes heated up on Thursday as one institutional investor sided with CEO Bob Iger and the company’s directors, while another backed hedge fund manager Nelson Peltz’s Trian Fund Management.

The New York City Retirement System, which owned $291 million worth of Disney stock at the end of last month, said the entertainment giant should get more time to achieve the strategic transformation it is working on under Iger, rejecting the nominees from Trian and Blackwells Capital, another activist fund that also wants seats.

Also on Thursday, investment firm Neuberger Berman, another Disney shareholder, said it will vote to support Peltz and Trian’s second candidate, former Disney chief financial officer Jay Rasulo, arguing the outsiders could play a critical role in finding a successor to Iger who has said he will leave at the end of 2026.

Blackwells on Thursday also ratcheted up the pressure on Disney by suing the home of Mickey Mouse in a Delaware court for information it says may point to possible disclosure violations in dealings with hedge fund ValueAct Capital.

ValueAct once managed pension fund money for Disney but said it no longer oversaw those assets when it began investing in Disney late last year. Its chief investment officer, Mason Morfit, earlier this month offered public support for Iger and the company’s sitting directors at an investment conference.

Representatives for Disney and Trian did not respond to requests for comment.

Shareholders will vote on April 3 on who will end up sitting on the company’s 12-member board. The fight has become the year’s most closely watched boardroom battle with Disney pointing to a raft of improvements and initiatives to persuade investors to re-elect its directors.

Peltz argues the company has lost its creative spark and needs him and Rasulo, who was passed over for the top Disney job years ago, to guide future decisions as board members.

Blackwells, which is pushing for three seats, generally supports Iger’s vision but said Disney should harness technology better and consider separating its hotels and parks into a separate company.

LAST DITCH APPEALS

All sides are making last ditch appeals to big investors at in person meetings and through Zoom (NASDAQ:) calls, people familiar with the matter said. Disney has also stepped up advertising with announcements drawing attention to the meeting.

Disney’s stock price has climbed 35% in 2024, but it remains down nearly 40% from its record high close in March 2021. Disney has argued its strong first quarter earnings and announcements including plans to join forces with Indian conglomerate Reliance Industries and offer more entertainment options shows Iger’s turnaround plan is working.

The activist investors have argued it is their pressure on the company that has helped fuel the stock price gain.

New York City Comptroller Brad Lander, who is responsible for the New York City Retirement System, said the company’s shares “have performed well” and “boards are most effective when members bring valuable perspectives and relevant experience and are focused on the long-term health of the company.”

In the last days, proxy advisory firms ISS, Glass Lewis and Egan-Jones have made recommendations with ISS and Egan-Jones backing Peltz, while Glass Lewis supported all the company’s incumbent directors.

ISS argued that the current board has not performed well in selecting someone to succeed Iger and Peltz, who has served on many boards, would help ensure Iger’s plans will be pursued even after he leaves.

ISS also wrote that while ValueAct’s “investment team met with Bob Iger on very limited occasions in the years prior to its investment in Disney, (ValueAct chief investment officer and co-CEO) Mason Morfit and Bob Iger do not have a personal relationship.”

While some investors such as Neuberger Berman and New York City have disclosed their votes, many, including big pension funds, powerful mutual funds and index funds, have declined to say how they will vote. Some big investors may wait to vote next week, people familiar with their decisions said.

Lander said that Peltz, who is running for a seat based on his experience as a director on boards including Procter & Gamble (NYSE:) and Wendy’s (NASDAQ:), should not be elected. “Nelson Peltz’s troubling performance on other company boards including Wendy’s raise concerns about the value he would bring to the table, and we do not believe this would be beneficial to preserving shareholder value,” Lander said.