Pernod Ricard, the world’s third largest liquor company, agreed to buy Allied Domecq, the no. 2 distiller, to add brands including Malibu rum.

Pernod will hold a conference call today to announce details of the takeover, it said in an e-mailed statement.

Allied Domecq, based in Bristol, England, agreed to the purchase by Pernod, which is teaming up with Fortune Brands Incorporated of America, for 670 pence a share, or $14 billion, the Wall Street Journal said, citing people familiar with the matter.

The acquisition is the biggest in the liquor business since industry leader Diageo was created in a $40 billion merger in 1997.

Paris-based Pernod, maker of Glenlivet scotch, and Fortune Brands, owner of the Jim Beam bourbon brand, are seeking to narrow the gap with Diageo, which makes Johnnie Walker whiskey. Allied Domecq said April 5 that it is in talks with the two bidders.

“The combination should prove very profitable,” Jean-Edouard Reymond, who oversees the equivalent of $5.5 billion, including Pernod shares, at UBI Bank, a unit of Union Bancaire Privee, in Paris, said. “In this industry, restructuring pays.”

The head of investor relations at Allied Domecq, Peter Durman, declined to comment, as did Clarkson Hine, a spokesman for Lincolnshire, Ill.-based Fortune.

Pernod and Fortune Brands will pay about 80% of the price in cash and the rest in Pernod stock, the WSJ said.

Diageo, based in London, owns 14 of the world’s top 100 spirits brands and had 8.9 billion pounds in sales in fiscal 2004. Pernod, which according to Impact Databank owns 11 top spirits brands, had sales of $4.7 billion last year. Allied Domecq had annual sales of 2.6 billion pounds.

Allied Domecq had a market value of $11.39 billion on April 4, the day before Pernod and Fortune said they may bid. The shares have climbed 20% since then.

Pernod shares yesterday fell 10 cents to $224.33 in Paris, giving the company a market value of $10.78 billion. Fortune Brands dropped 2% to $83.95 in New York Stock Exchange composite trading at 1:13 p.m. local time, valuing the liquor company at $12.2 billion.

Allied Domecq today will probably say fiscal first-half net income climbed 10% to 184 million pounds, according to the median estimate of five analysts surveyed by Bloomberg News, as sales of wine and spirits rose in the U.S.

Pernod had an operating margin – operating profit as a percentage of sales – of 20.4% last year, compared with Allied Domecq’s 22.4%, according to data compiled by Bloomberg. The debt-to-asset ratio at Pernod stood at 32.4 percent, compared with 47.5% at Allied Domecq.

Pernod, run by Chairman Patrick Ricard, 59, and its American partner plan to sell the Allied Domecq business that runs its Dunkin’ Donuts chain to help finance the transaction, people familiar with the discussions told Bloomberg News yesterday. They’ll split the remaining brands and may sell some to meet regulatory demands, the people said. Allied Domecq also owns Togo sandwich stores, Baskin-Robbins ice-cream outlets and 23.75% of Britvic, the maker of Tango soft drinks.

Diageo’s creation with the merger of Grand Metropolitan and Guinness in 1997 sparked a first wave of consolidation in the industry. Pernod and Diageo teamed up to buy Seagram Company’s drinks business, which they later split up. That purchase doubled Pernod’s liquor sales and propelled the French company into the no. 3 position in the industry behind Diageo and Allied Domecq.

Liquor makers must “consolidate to create a challenger able to compete effectively with Diageo,” said a credit analyst at Fitch Ratings in London, Frederic Gits. A transaction may trigger further mergers and “accentuate pressure on those who remain facing the giants,” he said in an interview today.

Morgan Stanley, JPMorgan Chase & Company and Deutsche Bank AG are advising Pernod on the acquisition. Goldman Sachs Group Inc. is Allied Domecq’s adviser. Credit Suisse First Boston is advising Fortune Brands, which also makes Titleist golf balls.

Pernod needs the purchase to win business in America, the world’s largest liquor market, analysts said. The French company’s sales rose 7.8% in North America last year, compared with growth of 0.4% in France and 2.5% everywhere else in Europe, where economic growth is lagging behind that of America.