(Yicai Global) April 11 -- Shares of New East New Materials fell by the exchange-imposed limit for the second consecutive day after the Chinese ink and adhesive products maker said the acquisition of Nokia’s stake in its joint venture with Huawei may fall through after the Chinese telecoms giant said it was unwilling to cooperate with the new partner.

New East New Materials [SHA: 603110] plunged 10 percent to close at CNY36.02 (USD5.23) a share today.

New East New Materials has not received any notice from Huawei that the latter would give up its preemptive right, indicating that the acquisition could founder, the Hefei-based company said yesterday. If Huawei sells its stake in TD Tech, new investors may bring uncertainties and change to the JV’s ownership structure, disrupting its business, New East New Materials added.

On April 9, New East New Materials announced it would buy Nokia’s 51 percent stake in TD Tech for CNY2.1 billion (USD309 million) to expand into wireless communication technology products.

On the same day, Shenzhen-based Huawei said it was unwilling to cooperate with the new partner because it had inadequate capabilities in the communications industry. It also said that it was assessing the situation and considering its options, including but not limited to exercising the right of first refusal for the JV’s shares or selling its stake in the JV, thereby ending the technology grants to TD Tech and its subsidiaries.

“Huawei said in its announcement that it is okay with Nokia quitting,” a relevant person from New East New Materials told Yicai Global yesterday, adding that the company is in talks with all related parties to solve the acquisition issues.

The takeover was advanced by New East New Materials’ Chairman Xu Guangbin, the source also said. Once the acquisition is completed, the firm will transform into a new-type telecom and digitalization tech group from a conventional manufacturer, the person added.

According to New East New Materials, Nokia is keen on the deal. “Given the current market situation, a Chinese company should own TD Tech for the sake of its future development,” Nokia’s China President Markus Borchert said at the time of the deal’s signing. “New East New Materials has sound connections with Chinese clients and can provide comprehensive solutions for both companies.”

New East New Materials also said yesterday that it received a letter from the Shanghai Stock Exchange on April 9, in which the bourse asked the company to explain the acquisition and private offering details.

Regulators must crack down on New East New Materials’ attempt to acquire other businesses and manipulate stock prices, Liu Shuwei, director of the research center for Chinese enterprises at Central University of Finance and Economics, said publicly yesterday.

Editor: Futura Costaglione