Statement on the Observer sale: Statement by Andreas Whittam Smith, chief executive of Newspaper Publishing plc and editor of the Independent

AFTER a failure to reach agreement on outstanding issues, negotiations broke down on Wednesday between Newspaper Publishing and Lonrho over the future of the Observer newspaper.

Because of the requirement for confidentiality when the negotiations were in progress, it was not possible for either the Independent or the Independent on Sunday to report a story which was extensively covered and commented upon by rival newspapers.

As a consequence, a false impression of the nature of the discussions between Newspaper Publishing and Lonrho has been allowed to develop unchallenged.

To set the record straight:

1. Lonrho first approached Newspaper Publishing some months ago after it had concluded that it no longer wished to sustain the large losses which the Observer was making.

2. The intention of both parties was never to close the Observer down, but to bring about a genuine union between the Observer and the Independent on Sunday involving the staff of both newspapers.

3. The result of the union would have been the continuation of the title and tradition of the Observer. It would also have meant the establishment of a more powerful liberal voice than the Sunday market has seen for many years.

While Newspaper Publishing could not reach a satisfactory agreement with Lonrho, the board is committed to applying those resources which are necessary to realise the expansion plans of both the Independent and the Independent on Sunday. Furthermore, having made a profit in the first six months of the year under intensely difficult trading conditions, both titles are now feeling the benefit of an improving economy. The Independent and the Independent on Sunday can move forward with confidence.