Guinness PLC and Grand Metropolitan PLC said today they would merge. The $15.8 billion deal, one of the biggest in British history, would create the world's seventh-largest food and drink company.

Grand Met, owner of the Burger King fast-food chain and Pillsbury Co. in the United States, also produces Smirnoff vodka and J&B whiskey, while Guinness's brands include its well-known stout, Johnnie Walker whiskey and Gordon's gin. Among Grand Met's other products are Green Giant vegetables and Haagen-Dazs ice cream.

The merger would create "a combined spirits and wine company which will truly be a world leader," Grand Met Chairman George Bull said at a news conference.

Industry analysts said the two companies fit together well in terms of products and geography, and that the strength of the combined company could prompt other mergers among large food and liquor producers.

"It makes total sense; there is virtually nothing that does not fit," said Dermot Carr, an analyst at Nikko Europe.

The merged company would have annual sales of about $22 billion, pretax earnings of $2.2 billion and a market value of $37 billion based on the companies' stock prices today. The stocks of both companies rose as investors cheered the announcement. Grand Met's stock advanced $1.23, to $9.57, on the London Stock Exchange. Guinness' stock surged $1.39, to $9.75, also on the London Stock Exchange.

Under the proposed stock swap, Grand Met shareholders would end up with 52.7 percent of the new company, GMG Brands, with Guinness shareholders getting the rest. In addition to stock in the new company, shareholders would receive a total of $3.9 billion in cash.

GMG Brands' four divisions would be United Distillers and Vintners, combining the liquor and wine operations; Pillsbury; Burger King; and Guinness Brewing Worldwide.

John McGrath, who would be chief executive when the merger is completed, said about 2,000 of the 20,000 jobs in the companies' liquor businesses would be cut. The two firms employ a total of 85,000 people worldwide.

Bull of Grand Met and Guinness Chairman Tony Greener have been friends and rivals for years, which led to the idea for the merger.

"The discussions started because I invited Tony to dinner," Bull said in an interview. After Greener returned from a trip to Africa, the two met and the broad outlines of a deal were set within weeks.

Bull said he did not expect the merger to face regulatory problems, because the combined company would have less than 10 percent of the world spirits market.

"We are entirely confident that we will be able to obtain the agreement of the regulatory authorities both here in Europe and also in the United States and elsewhere," he said.

Bull initially will be chairman of the new company jointly with Greener, but will retire as planned in July 1998, leaving Greener as chairman. Grand Met's McGrath will be chief executive, with the rest of the board made up of directors from both companies.

Analysts said competitors such as Britain's Allied Domecq PLC and Canada's Seagram Co. could be forced to seek mergers or alternative strategies to compete.

"All the others will be worried sick, but what are they to do?" said analyst Ron Littleboy at Nomura Securities Co. "This {company} is now just so powerful and there is unlikely to be a deal open to others which offers the same scale of benefits."

Other competitors would include Coca-Cola Co., PepsiCo Inc., Philip Morris Cos. and McDonald's Corp., the biggest restaurant chain in the United States, ahead of Grand Met's Burger King, which is based in Miami.

Grand Met also said pretax profit rose 3.5 percent, to $764 million, excluding special charges, in the first half of its fiscal year. CAPTION: IN PROFILE GRAND METROPOLITAN Based: London Established: 1934 Business: Owns Pillsbury Co. and Burger King fast-food chain; its brands include Green Giant, Haagen Dazs, J&B Scotch whiskey and Smirnoff Vodka. Yesterday's closing stock price: $9.57, up $1.23 on the London Stock Exchange. GUINNESS Based: London Established: 1886 Business: Distills and markets Scotch whiskey, gin and other spirits; brews and markets beer. Brands include Dewar's, Guinness Stout and Johnnie Walker. Yesterday's closing stock price: $9.75, up $1.39, on the London Stock Exchange. COMBINED Sales: $21 billion Employees: 85,000 Chief executive: John McGrath Rank: Seventh-largest food and drink seller worldwide. SOURCES: Bloomberg News, Associated Press, International Directory of Company Histories