Manchester City are willing to walk away from negotiations on Alexis Sanchez amid interest from Manchester United.
City had felt that a deal to secure the arrival of the 29-year-old in the January transfer window was imminent after they agreed personal terms with his representatives over a contract worth £13 million a season.
City is offering £20 million to Arsenal but they have been informed it will take a fee of £35 million to make the move happen.
United are willing to offer Sanchez higher wages and a fee of £25 million to Arsenal.
City agreed a £60 million deal with Arsenal in August, only for the transfer to collapse when Arsène Wenger failed to complete a move for Monaco’s Thomas Lemar on deadline day.