Sirius XM Holdings Inc. agreed to acquire Pandora Media Inc. in a US$3.5 billion deal, helping the satellite-radio company controlled by billionaire John Malone expand into online music.

The all-stock transaction values Pandora at US$10.14 a share, about 12 per cent more than the company’s closing price on Friday. Sirius XM already has a 15 per cent stake in Oakland, California-based Pandora, the companies said in a statement Monday.

The combination will help Sirius XM expand beyond an audience that largely listens to the satellite radio company’s programs while driving. Sirius XM acquired a stake in Pandora last year for US$480 million, giving the online-radio company a lifeline after upstarts such as Spotify Technology SA began luring away streaming-music subscribers. Pandora has introduced its own on-demand music service and brought in former Sling TV Chief Executive Officer Roger Lynch a year ago to work on a turnaround.

Pandora jumped 8.6 per cent to HS$9.87 at 7:49 a.m. in New York. That’s below its 2018 closing high of US$9.97 earlier this month. Sirius XM fell 4.4 per cent to $6.67.

Pandora had surged 89 per cent this year through Friday after setbacks in 2017 sank the stock. The company recovered this year after showing it could attract new paying subscribers and fend off music-streaming competitors ranging from Spotify to Amazon.com Inc. Pandora had about 6 million subscribers at the end of the second quarter.

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Sirius XM and Pandora said the transaction is expected to be completed in the first quarter of next year. They’re scheduled to hold a conference call to discuss the combination at 8:30 a.m. New York time.