"Tim and I have had our differences and that happens, and I think that is all part of a dynamic party and a dynamic caucus, but at the end of the day we share common goals and we share our Conservative principles," Klees said in an interview.
"In fact, I think that Tim has an excellent chance to be the next premier and my colleagues in caucus, I believe, have a very good chance of forming a government."
Klees was one of the two Tory caucus members who supported a grassroots call for a leadership review last year — he eventually backed down to support Hudak — but insisted both men remain committed to one goal: defeating the Liberal government.
After 20 "very good years" in public life, it's time for someone else to carry the Conservative banner in the riding of Newmarket-Aurora, north of Toronto, said Klees.
"There's never a good time for these things, but I gave it a great deal of thought over the holidays, and I just felt it was time to move on, time to pass the baton to someone else who may have more energy than I do at this point," he said.
"One has to listen to one's heart when it comes to these changes in life."
Klees lost two previous bids to become PC leader, to John Tory in 2004 and to Hudak in 2009, but dismissed suggestions he will sit out the next election and launch another leadership campaign if Hudak fails to lead the Tories to victory.
"Absolutely not," he said. "My time in public life is over."
Klees, 62, plans to stay on the job until the election, which is expected this spring, and said he told Hudak he wanted to keep his Opposition critic's job until then.
Klees, whose family immigrated to Canada from Germany when he was five years old, said he plans to return to the private sector, although his future is "not clear" at the moment.
"I'm looking forward to whatever the future may hold," he said.
"I don't know what that is, but I just feel that I've served my time in public service and it's time to move on."
Klees had run a financial services consulting practice which included contract negotiations for professional athletes in the CFL and NFL, and was also a co-founder of the Municipal Gas Corporation.
After a meeting Tuesday, Hudak agreed Klees would retain his critic responsibilities and praised the veteran Conservative as a "tireless advocate" for his constituents.
"Recently, Frank has fought hard to expose Liberal waste, scandal and mismanagement at ORNGE (air ambulance), Metrolinx and with the Presto fare card, demanding that this government put taxpayer interests first," said Hudak.
Klees was first elected to the legislature in 1995 and re-elected in 1999, 2003, 2007 and 2011, serving under premiers Mike Harris and Ernie Eves as chief whip and as minister of tourism and minister of transportation.
His retirement announcement comes amid campaigns for two byelections in Niagara Falls and the Toronto area riding of Thornhill, where former PC finance critic Peter Shurman resigned after clashing with Hudak over expense claims.
Hudak also moved Tuesday to fire PC candidate Dave Brister in Essex after the candidate took to Twitter and said he was told to recant his opposition to right-to-work legislation.
Brister said he refused and was informed Tuesday afternoon that he would no longer carry the PC banner in Essex.
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