The Hammers manager reveals that the club cannot prevent the Senegal international from using a release clause in his contract, with the Gunners interested in him
The Senegal international has been a revelation since moving to Upton Park in the summer on a free transfer but Goal.com exclusively revealed that Arsenal will move for him in January as his release clause is "close to £4 million".
And while the Hammers boss would love to keep the combative player in his side, the clause means that a host of clubs may attempt to snap Diame up in the approaching transfer window.
"There is always a situation where you are powerless to keep a player. Because of the size of the fee, you can't turn it down and the chairman says: 'We can't say no, we've got to move him on' but I won't be disclosing a player’s contract," Alllardyce told reporters.
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"I didn't really ever have to convince Mohamed to join West Ham, it was all about the contract," he confirmed. "In the end, it took a bit of time, but we came to a financial agreement that was suitable for the club and the player.
"I spoke to Kenny about signing Mo. For me, it just made me feel so much better than I already felt about signing him, to have Kenny saying: 'Yeah, we were going to take him'.
"Last year, at Wigan, Mohamed didn't play as often. In the beginning, it was the refusal to sign a new contract and wanting to see it out.
"Then, at the latter end of the season, Wigan did very well and didn't need him. In the end, that worked to our benefit."
Allardyce admitted that the January window is a worrying time for managers, adding; "There is always a chance you will lose football players when they start getting attention, because everybody is searching for better players.
"I am listening to Michael Laudrup trying to keep Michu at Swansea because January is nearly here and all the agents are ringing him up.
"All that distraction starts now and doesn't finish until January 31, when the transfer window is closed. That's why we should all have a break."