Shares in Jefferson Smurfit Group rose again yesterday after the company said it was to start talks with a rival bidder to Madison Dearborn. The identity of the new bidder was not disclosed but is understood to be Texas Pacific Group.

Smurfit shares hit €3.16 on Monday after Madison Dearborn Partners presented its €3.7 billion bid to take the company private. Smurfit also said it had received preliminary approaches from another group.

The shares drifted back over the week as the the prospect of the second bidder entering the fray seemed to wane. Yesterday's statement from Smurfit that talks with Texas Pacific would begin as soon as was practical gave fresh impetus to the shares, which reached €3.18 before dropping back to close at €3.14.

The shares were further supported by reports that Mondi, the South African-owned paper group, was also considering a bid. Mondi is part of the massive Anglo American Group and has a turnover of more than €2 billion, considerably less than Smurfit's €7.6 billion.

Texas Pacific, like Madison Dearborn, is a US private equity company. Both groups specialise in buying undervalued assets. Texas Pacific was an investor in Ryanair before its stock market flotation in 1997.

Smurfit said yesterday that it was "currently talking with a potential offeror and with management to agree, as soon as possible, a realistic schedule of meetings between the two parties". The statement was issued following reports that the company was not facilitating meetings between Texas Pacific and the Smurfit management.

Dr Michael Smurfit, the chairman and chief executive, has given a commitment to support the Madison Dearborn offer and also pledged to sell his shares. Along with the other executive directors, including chief executive designate Mr Gary McGann, he is considered to have a conflict of interest and has no role in the process of considering the bids.

A committee of independent directors led by the senior non-executive director, Mr Martin Rafferty, is dealing with the process. The independent directors have already recommended the Madison Dearborn offer but said on Monday they would look at any other bid. Any rival offer would have to prise the board recommendation and the management's support away from Madison Dearborn. Sources said yesterday that this would not present an insurmountable obstacle.

The management's commitments can be revoked if the Madison Dearborn offer fails, which is likely if a higher bid is made by another party. The management would then be free to enter into an arrangement with the higher bidder. Sources close to Madison Dearborn said yesterday it planned to send out its formal offer to shareholders by the middle of next month, if not earlier. Shareholders will then have 21 days within which to respond. Madison Dearborn has said that it will not increase its offer - put at €3.26 per share - unless there is a rival bid.