Weyerhaeuser was frus-trated again yesterday in its 14-month pursuit of Willamette Industries after the rival forest products group rejected its Dollars 6bn takeover offer.

Shares in Willamette plunged 12 per cent to Dollars 44.15 by lunchtime after the target said it would terminate discussions on the Dollars 55 per share all-cash offer, because it was inadequate. The stock rose last month when Willamette said it would discuss the bid.

Weyerhaeuser said it "remained committed to this transaction", but repeated that Dollars 55 per share was the highest price it was prepared to offer.

The group added it would withdraw its bid if Willamette went ahead with a proposed bid for the building materials business of Georgia-Pacific, another forest products group. Willamette said it would continue negotiations with Georgia-Pacific as it believed this deal would create significant shareholder value.

Weyerhaeuser raised the prospect of extending its long proxy battle until the summer, saying it would propose another three nominees for election to Willamette's board at the next annual meeting.

It secured three seats on its rival's board at Willamette's shareholder meeting last July.

Some shareholders and corporate governance activists expressed frustration with Willamette yesterday.

Gary Lutin, an investment banker who acts as a corporate governance adviser, said: "Shareholders have the weapons to influence the outcome. The question is whether any of them have the stomach to do so."

Peter Schoenfeld, chairman of P Schoenfeld Asset Management and a Willamette shareholder, added: "Shareholders should have the opportunity to vote on the Georgia-Pacific transaction, particularly since it is in the middle of a proxy fight and a tender offer."