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A decision on whether to proceed with the controversial sale of The Observer, the world's oldest Sunday newspaper, will be made by Christmas, its current owner's boss has told disgruntled staff.
Sky News has learnt that Anna Bateson, the Guardian Media Group (GMG) chief executive, notified staff on Thursday that a preliminary assessment of shareholders in Tortoise Media, a five year-old news start-up, had found them to be "fit and proper".
Her latest message to staff comes shortly before they are due to be balloted on strike action amid unhappiness about the way the sale has been handled.
"I know it is an unsettling time and the available information cannot be complete, as we are still in discussions," Ms Bateson wrote.
She vowed that the Scott Trust, which effectively owns GMG, would retain a small stake in The Observer if the sale takes place.
Ms Bateson told GMG employees that when Tortoise Media - founded by former Times editor James Harding - approached it about buying The Observer, "we were already beginning to think about the future of the title, given its financial situation and the fact it is a UK-only, Sunday print newspaper".
"It became clear that this was a serious offer that could create a more sustainable business strategy for the Observer."
Mr Harding has promised to continue publishing The Observer as a Sunday newspaper, although media executives have questioned the viability of doing so in the long term.
He has confirmed talks to raise £25m from new and existing shareholders to invest in The Observer.
"The Observer would be the brand for the media organisation and all the existing sections - Observer Magazine, New Review and OFM - would be retained," Ms Bateson wrote on Thursday.
"In addition, Tortoise would invest in creating a dedicated digital presence for the Observer, as well as newsletters, podcasts and events."
She added: "Negotiations are ongoing and there will be a decision on the deal before Christmas.
"We envisage that if the deal goes ahead, there will be a transition period, starting in the new year, that will run over months to make the process as smooth as possible.
"And there would continue to be some shared services, including printing and distribution."
If the deal proceeds, it would represent the first change in ownership of The Observer, which was first published in 1791, in over three decades.
Current and former staff have, however, accused GMG and the Scott Trust of betraying a commitment to protect the newspaper.
Ms Bateson moved to address that criticism on Thursday, saying that "The Scott Trust exists unambiguously to support the Guardian" and citing minutes from a 1993 board meeting.
"The Scott Trust has sought commercial and financial sustainability for the Observer since it first bought it in 1993, including attempts to integrate it more closely with the Guardian in 2009, after the idea of closing the paper was floated and then rejected by the Scott Trust," she wrote.
"But the Observer has never been covered by the protections of 'in perpetuity' that apply to the Guardian."
Ms Bateson warned employees that if the sale to Tortoise Media collapsed, "the status quo is not an option", with "difficult choices" needing to be made "urgently".
"We want to be plain about this because we all have a responsibility to be honest about the growth prospects of a UK-only, Sunday, print title when it is competing with investment in the future of the Guardian," she wrote.
"Although the Observer has performed well in terms of its market share, its circulation is, like all newspapers in print, in continual decline and the title is forecast to be loss-making within three years, if not sooner.
"If shared costs, such as technology, ad sales, marketing, rent, finance and HR as well as sport, international and business journalism, were allocated, the Observer would already be loss-making."
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The GMG chief also insisted that the company was "in constructive talks with the [trade unions] NUJ and Unite about the potential sale and its impact on staff.
"We have heard from the unions that there are several areas of concern in relation to the potential impact on staff.
"These talks are ongoing and we hope to be able to respond to areas of concerns that have been raised."
Last month, an open letter signed by leading figures from the arts and culture including Bill Nighy, Hugh Grant, Mary Beard and Ralph Fiennes labelled the prospective deal "disastrous".
"While figures of £100m are being bid for other publications [a reference to the recent sale of The Spectator magazine], this poorly funded approach sets the value of the Observer at or near zero," the letter said.
GMG declined to comment further on the message to staff.
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