The Korea Development Bank(KDB) is taking official steps for a merger between South Korea’s two largest shipbuilders. 

The state-run bank, which holds a 55 percent stake in Daewoo Shipbuilding and Marine Engineering(DSME), said on Thursday it will sign a basic agreement with Hyundai Heavy Industries(HHI) to sell the nation's second largest shipbuilder.  

Under the prospective deal, KDB and Hyundai Heavy will create a joint company to put both Hyundai Heavy and Daewoo Shipbuilding under it. 

KDB will hand over all its 60 million Daewoo Shipbuilding shares to Hyundai Heavy and increase Daewoo Shipbuilding’s capital by up to two-point-five trillion won. In return, Hyundai Heavy will give KDB stocks of the new entity. 

Daewoo Shipbuilding's labor union expressed opposition to the merger, citing possible mass layoffs as a result. It threatened a general strike unless the plan is scrapped.