The lead is buried in the article

During the meeting, Putin said he offered Prigozhin the option to allow Wagner fighters to continue to serve in Ukraine under the leadership of their battlefield commander, Andrey Trochev.

“All of them could gather in one place and continue to serve,” Putin told Kolesnikov, who has covered the Kremlin leader for several decades. “And nothing would change for them. They would be led by the same person who had been their actual commander this entire time.”

The offer met with some support from the Wagner commanders, Putin said. “A lot of them nodded their heads when I said this. But Prigozhin, who was sitting in front of them and didn’t see [their reaction], said: ‘No, the guys won’t agree with that decision.’”

The interview appears to be part of a broader effort by the Kremlin to win the loyalty of the Wagner rank and file, even while seeking to discredit Prigozhin by leaking sensitive and embarrassing information about him.

During the interview, Putin also said Wagner did not exist, citing Russian legislation outlawing private military companies and putting its future in doubt.

Dara Massicot, a senior policy researcher at Rand, a US thinktank, who specialises in Russian military strategy, said Putin’s version of events signalled he could outlaw Wagner at any moment while seeking to drive a wedge between Prigozhin and his fighters.

emphasis mine. Now it is kinda a show of weakness. He is having to court the fighters, instead being confident in their loyalty to simple order. However after that explanation it makes sense, more than the headline would first give reason to. Plus finally of course... trust zero on the truthfulness to any Kremlin statements information. However what is truthful, they are trying to achieve something with the statement, even if they would be lying through their teeth. There was a reason for the messaging.

honestly Guardian should have lead with title or at least first lead message of "Putin is trying to drive wedge between Prigozhin and Wagner, new interview shows" or something like that.

This is what I don't get. Surely he values the mercenaries to fight, but the whole situation makes him look weak. Isn't that bad long term? What's the endgame here?

Weak to his core demographic, but if he wants Wagner to fight then assassinating the head of Wagner would be a horrible idea.