The Observer is 'up for sale'

THE Observer, Britain's oldest Sunday newspaper, could be sold to shield its owner, Guardian Media Group, from continuing losses at the title.

Informal soundings are understood to have been taken with possible interested parties, including other newspaper groups, though no price has been put on the paper.

The newspaper has lost money since it was acquired by the Guardian group in 1993 for about £27m.

Both The Guardian and The Observer are owned by the Scott Trust, a charitable foundation. Senior insiders at the group were stressing that the Scott Trust's duty was to safeguard the 'financial independence' of The Guardian only, not The Observer.

It is understood that the future of The Observer is causing intense debate inside the Scott Trust. A perceived obstacle to an early sale is the lack of obvious credible bidders, apart from venture capitalists. Most other newspaper groups could face competition issues.

The news comes as the Guardian group is taking a number of crucial financial decisions. It has recently said it will invest £50m in new printing works aimed at producing a mid-sized version of its flagship paper, The Guardian, as well as The Observer, in response to the tabloid editions now being producedby rivals The Times and The Independent. And it plans to move to new London premises in four years' time.

The group has shored up its finances by taking full control of the profitable Autotrader group and has rejigged its big broadcasting portfolio.

Short of a sale, it is intent on a radical redesign for The Observer, though senior insiders dismissed suggestions that the newspaper would be turned into a news magazine, capitalising on the strength of its food, sport and music supplements.

While The Guardian is profitable, The Observer has been a drain on resources. The group's national newspaper division lost £6.2m last year on a turnover of nearly £230m.

Observer editor Roger Alton denied he was being pressured to make radical changes. He said: 'We are going into mid-size and we are working out how best to do that.'

Alan Rusbridger, editor of The Guardian and executive editor of The Observer, was not available for comment.