Southern Co., the third-largest U.S. utility owner, agreed to buy natural-gas distributor AGL Resources Inc. for $8 billion in cash to capitalize on growing demand for the heating and power plant fuel.

There has been middle-market deal activity in the natural gas sector this year. New York private equity firm Pine Brook is investing $300 million to Red Bluff Resources Holdings LLC, which will focus on buying and developing onshore crude oil and natural gas reserves in the Midwest as well as well as the Permian basin. The PE firm is also investing $100 million to create Cahill Services LLC, which will provide specialty rental services to oil and energy companies.

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