Pandora Media (P) received an investment-rating downgrade to sector perform from outperform from RBC Capital Markets after the music-delivery company said earlier this week it agreed to be acquired by satellite-radio company Sirius XM Holdings (SIRI) in an all-stock deal valued at about $3.5 billion at the time of the announcement.

RBC kept its price target on Pandora’s shares at $10 each, which compares with a Wednesday closing price of $9.28. The shares fell 3.0% to $9.00 in recent Thursday pre-market trading amid the downgrade.

The terms of the deal call for Pandora shareholders to get 1.44 newly issued Sirius XM shares for each Pandora share they hold, valuing Pandora at about $9.19 as of Wednesday’s market close. When the deal was first announced, the value of the deal was about $10.14 per Pandora share.

In a note to clients, RBC said it views the deal “as a logical strategic step for Pandora.” It added: “Synergies between its very strong in-home US presence and SiriusXM’s strong in-car presence should be generatable over time. Given rising competitive intensity in this sector, this was likely the safe, smart strategic move by P.”

The firm noted Sirius already had a 15% stake in Pandora, and hence called the deal “a not-too-surprising development.” It said potential competing bidders would include Spotify (SPOT), Apple (AAPL), Alphabet’s Google (GOOG), and (AMZN), but added “we believe it reasonably unlikely that any of these companies would come in at this point.”

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