ZURICH/TOKYO (Reuters) -SoftBank Group has agreed to buy the robotics business of Swiss engineering group ABB in a $5.4 billion deal, as the Japanese investor forges ahead with a strategy to fuse robotics and artificial intelligence.

The acquisition, announced on Wednesday, is the latest by founder and CEO Masayoshi Son to establish Softbank as a core player in the development of artificial intelligence.

SoftBank pushed into humanoid robotics a decade ago with its Pepper robot but later scaled back its ambitions.

Its recent investments in the sector include Berkshire Grey and AutoStore, and it also led a $40 billion funding round in ChatGPT-maker OpenAI and in March bought chip design company Ampere for $6.5 billion.

SOFTBANK'S STRATEGY: MERGING AI WITH ROBOTICS

"SoftBank's next frontier is Physical AI," Son said in a statement.

The deal means ABB has abandoned its original decision to spin off and separately list the industrial automation business, which competes with Japan's Fanuc ( FANUF ) and Yaskawa, as well as Germany's Kuka in making factory robots.

The decision is the first major move under ABB CEO Morten Wierod, who took charge last year, and follows years of struggling sales and falling profitability for the robots business.

ABB's robotics division, which employs 7,000 people, generated sales of $2.3 billion last year, equivalent to 7% of ABB's total revenues. But the company saw limited crossover with the rest of its business, which focuses primarily on electrification and automation.

ABB announced to shareholders in April its decision to spin off robotics but decided to sell instead because the SoftBank deal provided money immediately, Wierod told Reuters.

Following the deal's announcement, Switzerland's Zuercher Kantonalbank said it had expected a valuation of slightly less than $4 billion for the robotics business under the planned spin-off.

ABB shares opened 2% higher in Zurich after the sale announcement, while SoftBank's shares did not move significantly, ending the day down 2%.

ABB TO FOCUS ON ELECTRIFICATION, AUTOMATION, ACQUISITIONS

"We always said that robotics is a market with much higher volatility. And that's what we've seen over the years, both when it comes to growth, but also margins," Wierod said. "So it is a bit of a different market than, say, the rest of ABB today, which is focusing on electrification and automation."

The transaction is expected to close in mid- to late-2026 and will generate cash proceeds of roughly $5.3 billion, ABB said.

The money will be spent on developing new technology and production capacity in electrification and automation, and could also fund new acquisitions, Wierod said.

"We do have firepower to also do bigger acquisitions, so we're not excluding bigger deals," Wierod said.