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FirstService to eliminate dual-class voting structure; chairman to remain

FirstService Corp. said it entered an agreement with Jay Hennick, the company's founder, chairman and largest voting shareholder, to seek approval of disinterested holders of FirstService's subordinate voting shares for a transaction that will facilitate the settlement of the restated management services agreement signed in 2004 and the elimination of the company's dual-class voting structure.

The management services agreement includes long-term incentive arrangement and was signed between the company, Hennick and Hennick-controlled corporation Jayset Management FSV Inc., which receives all fees and other entitlements under the agreement.

Under the proposed transaction, FirstService will acquire the shares of Jayset Management, while Henset Capital Inc., which Hennick also controls, will convert all of FirstService's 1,325,694 outstanding multiple voting shares into subordinate voting shares on a one-for-one basis without consideration.

Hennick will remain as the Canadian real estate services company's chairman at the discretion of the board, according to a release.

FirstService will pay US$62.9 million in cash and issue 2,918,860 subordinate voting shares at C$115.58 per share, as part of the deal.

Hennick is expected to have control and direction over 5,767,080 subordinate voting shares, or 14.8% of the expected outstanding shares following the completion of the transaction. FirstService anticipates having 39,026,207 subordinate voting shares outstanding immediately following the completion.

The transaction is subject to, among other things, the approval of a majority of the disinterested holders of FirstService's subordinate voting shares at the annual meeting to be held May 3. The company said its directors would vote for the transaction and that the board recommends that shareholders approve it at the meeting.

T. Rowe Price Associates Inc., the largest holder of subordinate shares of FirstService at about 17.6%, advised the company that it supports the proposal.

At the meeting, FirstService will also ask shareholders to approve the elimination of the company's multiple voting shares as part of its authorized capital, as well as to redesignate its subordinate voting shares as common shares.

The company will fund the transaction using its revolving credit facility.