Satellite radio company SiriusXM plans to acquire music streaming service Pandora in a $3.5 billion all-stock deal unveiled Monday.

The agreement includes a "go-shop" provision where Pandora "may actively solicit, receive, evaluate and potentially enter negotiations with parties that offer alternative proposals following the execution date of the definitive agreement."

Acquiring Pandora would make SiriusXM the world's largest audio entertainment company, with over $7 billion in combined revenue expected in 2018. The deal would bring together SiriusXM's 36 million subscribers in North America and Pandora's more than 70 million monthly active users.

Pandora shares closed trading down 1.2 percent at $8.98 a share, after rising more than 10 percent in premarket trading, while Sirius stock fell 10.3 percent to $6.26 a share.

Shareholders will receive 1.44 of newly issued SiriusXM shares for each Pandora share they hold, the companies said. The implied Pandora price from this deal is $10.14 a share, or a 13.8 percent premium over a 30-day volume-weighted average price.