Directors of Pargas Inc. completed an agreement yesterday to sell the Waldorf gas distribution business for nearly $175 million.

Under the plan, Pargas operations will be purchased by a new private company that will be formed by Forstmann Little & Co. of New York with several Pargas executives as investors.

The as-yet-unnamed new firm will pay $42.25 a share for all the outstanding common stock of Pargas, a total of $173.2 million for the 4.1 million shares. In addition, the Pargas cumulative preferred stock will be redeemed at a cost of about $1.5 million.

The buy-out plan was arranged after two investor groups began buying Pargas stock and it appeared the company might be drawn into an unsolicited takeover fight. Rather than sell out to either group, Pargas brought in the investment banking firm of Kidder Peabody & Co. and arranged the deal with Forstmann Little, a private investment firm.

Pargas is a liquefied petroleum gas distribution firm with headquarters on the Eastern Shore of Maryland.

The final agreement announced yesterday is subject to a number of conditions: holders of a majority of Pargas shares must approve the plan; the Securities and Exchange Commission must give its okay and the buyers must arrange financing.