UPDATED with closing stock prices. SiriusXM, the satellite radio company controlled by John Malone’s Liberty Media, is buying Pandora Media in a $3.5 billion aimed at creating a larger rival to Apple Music and Spotify in the intensifying streaming music battle.

The all-stock deal imputes a market valuation for the combined entity of $34 billion, just ahead of Spotify’s. The transaction follows last year’s move by Sirius to spend $480 million for a 15% stake in Pandora.

SiriusXM said the deal would create the “largest digital audio audience” in the U.S. The satellite radio company has more than 36 million subscribers across North America and 23 million-plus annual trial listeners. Pandora claims more than 70 million monthly active users.

SiriusXM CEO James Meyer said on a conference call that the two companies had held merger talks in 2017. “We couldn’t reach an agreement on value, quite honestly,” Meyer said.

Roger Lynch, who took over as CEO of Pandora after a long run at Dish, where he launched its Sling TV service, called the deal a “powerful combination” of assets. In a press release, he said the transaction would marry “SiriusXM’s content, position in the car, and premium subscription products, along with the biggest audio streaming service in the U.S.”

Pandora shares dipped 1% to $8.98 after the news, but Sirius investors hammered the stock of the acquiring company, apparently out of concern for the price of the deal. Shares dropped more than 10% to close at $6.26, the middle of their 52-week trading range. Trading volume for Sirius was nearly eight times the average level.

Analysts cheered the merger, though they said it was not unexpected. “Sirius investors had a sense that a transformative maneuver was forthcoming,” wrote Steven Cahall of RBC Capital Markets in a note to clients. “We think the deal is positive from a strategic perspective as it should help Sirius evolve amid terminal growth value risk from streaming competitors. We maintain our Sector Perform rating given Sirius’ rich valuation and upcoming dilution, but see this as the most logical move by management in a consolidating media industry.”