Fayed offers to buy ailing paper

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The Independent Online

Media Editor

The persistent would-be media baron, Mohammed al-Fayed, has offered to buy the ailing Observer title for pounds 15m from the Guardian media group.

If successful, the Egyptian-born businessman intends to print the title at a yet-to-be determined site, though sources close to him warn there could be an "inter-regnum" before the paper returns under new management. Mr Fayed is promising to take on current staff.

But the offer, discussed last week by members of the Scott Trust, the charitable organisation that owns the Guardian group, is unlikely to be accepted. The Trust is believed to be unwilling so far to abandon the Observer, which has lost pounds 17m in two years and seen its circulation fall to 450,000 from 500,000 since it was bought from Lonrho in 1993 for pounds 25m.

Peter Preston, editor in chief of both the Guardian and the Observer, is believed to have argued strenuously for more time to turn the title around.

The Sunday title's problems have generated tensions at the Guardian, where journalists are concerned that management will force budget cuts in order to offset losses of the sister publication. There is also concern that the Guardian group will attempt to integrate the two titles in a cost-saving exercise.

But in an interview with The Independent, to be published in the media pages of section two tomorrow, Alan Rusbridger, editor of the Guardian, insists there are no plans to merge the operations and that the Guardian's budget has been "ring-fenced". He concedes, however, that some limited integration may be contemplated.

Mr Fayed's interest follows several attempts to buy or launch a national newspaper. Last year, he was rebuffed by Rupert Murdoch's News International in efforts to save Today from closure.

Plans for a new Sunday newspaper, Life on Sunday, have been abandoned, although dummy editions were prepared.

Mr Fayed, the controversial owner of Harrods, has mounted a running campaign against the Government. He co-operated with the Guardian to expose Jonathan Aitken over the minister's controversial stay at his Paris hotel, the Ritz.

Last month, Mr Fayed announced the creation of Liberty, a company dedicated to expanding into media businesses. Its first venture was the relaunch of Punch.