Credit: (South Jersey Industries, Inc.)

South Jersey Industries, Inc., the owner of two of the state’s four gas utilities, is being taken private in an all-cash deal valued at $8.1 billion.

The Folsom-based energy company has entered into an agreement to be acquired by the Infrastructure Investments Fund, a group within J.P. Morgan Investment Management Inc. Under the terms of the transaction, IIF will purchase SJI for $36 per share in cash, reflecting a 46% premium on the company’s average 30-day recent trading stock price.

While some of the state’s utilities have changed hands in recent years, this proposed deal would be the first in which a company is taken private. Analysts said the deal reflects how attractive utilities are to investors — even at a time when many clean-energy advocates are pressing for states to phase out use of fossil fuels, particularly natural gas.

Reliable investment

“The investments are attractive because of the risk-adjusted level of return,’’ said Paul Patterson, an energy analyst at Glenrock Associates, referring to the steady and reliable profits earned by regulated utilities. “These guys are going to extract some value.’’

SJI owns South Jersey Gas and Elizabethtown Gas, utilities serving more than 700,000 customers around the state. It also owns an unregulated subsidiary, SJI Energy Enterprises, which is mostly focused on clean energy and renewable energy. Last April, the company announced a comprehensive clean-energy plan, including a commitment to achieve carbon-neutral operations by 2040.

“As energy markets across the U.S. and New Jersey accelerate the transition toward low carbon and renewable energy, the SJI board determined now is the opportune time to join forces with IIF,’’ said Mike Renna, president and CEO of SJI.

For South Jersey Industries, the deal also provides access to capital without going to the capital markets, according to Renna. It gives SJI the resources to modernize its gas distribution system as well as its decarbonization initiatives.

Gas is going nowhere

It also suggests that despite pressure from clean-energy advocates, gas will retain a prominent role in New Jersey’s energy future.

“The rumors of the death of natural gas are highly exaggerated,’’ Patterson said. “The fact is it is a big industry.’’

“At the end of the day, we are an infrastructure company. We make money putting stuff in the ground,’’ Renna said.

“We are fully committed to decarbonization,’’ Renna added, citing the company’s investments in renewable natural gas made from biogas and green energy, which can be mixed into natural-gas delivery systems. It is produced via the electrolysis of water using electricity from renewable sources. “What really made it work for both of us was the alignment of our goals,’’ he said.

IIF is an approximately $20 billion private investment vehicle focused on investing in critical infrastructure, such as renewable energy, water, natural gas and electric utilities. It already owns five utilities globally.

“SJI’s long track record of investing in sustainability and clean-energy initiatives has translated into a clear competitive advantage,’’ said Andrew Gilbert, investment principal to IIF. “We believe our expertise, resources and experience can help SJI further build its leading position in the industry.’’

Approval by regulators required

SJI will remain based in Folsom and Mike Renna, president and CEO, and the current management team will remain in place. Renna said no layoffs are anticipated as a result of the transaction, which requires approval from the New Jersey Board of Public Utilities and federal regulators.

The BPU declined to comment, saying it will ultimately have to act on the SJI petition.

The New Jersey Division of Rate Counsel also declined to comment on the proposed deal, saying the office has yet to see any filings. The office will look to ensure ratepayers’ interests are protected and there are tangible benefits to customers of the two utilities.

“Since it appears a fund rather than a utility purchasing South Jersey Industries, we will need to look at that and determine what additional ratepayer protections are needed,’’ said Brian Lipman, director of Rate Counsel.

Evelyn Liebman, associate director of AARP New Jersey, said the BPU should only approve the deal if it results in enduring and sustainable benefits for consumers. “Policymakers need to ensure that ratepayers do not bear the costs and risks of acquisition, or possibly lead to residential rate increases.’’