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Duke Energy Corp. is close to a deal to buy Progress Energy Inc. in an all-stock merger that would value its smaller rival at more than $13 billion, people familiar with the matter said, joining forces to save on costs and seek cheaper sources of energy as utility companies embark on a consolidation spree.

A deal is expected to be announced Monday, although the final details are still being negotiated and things could still fall apart, the people cautioned. Duke is paying a "low premium" to Progress's shares, which closed Friday at $44.72 in New York Stock Exchange trading, giving the company a market value of $13.1 billion, they added. Including $11.4 billion in Progress's long-term net debt and excluding the $691 million in cash it had as of September 30, 2010, the total deal value of the deal is between $24 billion and $26 billion, according to a person familiar with the matter.

Spokesmen for Duke and Progress declined to comment.

Duke and Progress have eyed each other for years, and "the stars finally aligned," including the advancing ages of the chief executives of both companies, which allowed a deal to move forward, the people familiar with the matter said. Robust debt markets that make financing affordable have also helped. Duke Energy's CEO James Rogers, who became head of the company in 2006 after Duke's merger with Cinergy, is 63 years old. Progress CEO William Johnson is 56 years old. He was the company's president and chief operating office until he was promoted in October 2007.

On a state level, the transaction technically only needs regulatory approval from North and South Carolina, the people familiar with the matter said. That makes deal closure more certain than other utility deals that often fall through because they have to get regulatory clearances from multiple state governments, in addition to federal clearance.

Headquartered in Raleigh, North Carolina, Progress has more than 22,000 megawatts of power generation capacity with $10 billion in annual revenue. The company has two electric utilities that serve over 3 million customers in Florida and the Carolinas. Duke Energy, with a market cap of $23.6 billion, provides gas and electricity services to customers in the Carolinas as well as Ohio, Indiana and Kentucky. The deal would result in significant cost savings for the two companies, according to the people familiar with the matter.

Duke officials have said the company would pursue other acquisitions after it lost a bid to buy the U.S. unit of Germany's E.On AG, which was sold to PPL Corp. last April for $7.6 billion. Consolidation among utilities has been widely expected because companies can save on costs and seek newer sources of electricity and gas more cheaply when they join forces. In October, New England utility companies NStar and Northeast Utilities agreed to merge in a $4.2 billion deal that will create a regional energy giant.

For the third quarter of 2010, Duke had net income of $666 million, compared with $106 million during the same period in 2009. Progress reported 2010 third-quarter earnings of $361 million, compared with $342 million for the year-ago quarter.

News of the potential merger was earlier reported by The Financial Times.