AC Milan will instruct the striker's agent to squeeze an increased fee out of the Gunners, who had been looking to pay 31 million euros.
Goal UK reported earlier this week that Arsene Wenger and the player’s agent, Mino Raiola, were due to meet in Brazil — where the Arsenal manager is currently working as a pundit on French television — on Saturday, with a view to thrashing out a deal for the controversial Italy striker.
Arsenal was hopeful of being able to sign the former Manchester City star for around 31 million euros but Milan has issued Raiola a mandate to get an extra 12.5 million euros from any potential buyer.
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Having missed out on Champions League qualification, Milan is willing to let its star player leave. But with Manchester City due to receive a 20 percent sell-on fee, the Italian giant is hoping to drive up the asking price.
Balotelli has scored 28 goals in 51 appearances for Milan since returning to Serie A in January 2013 and was coy when questioned about his future ahead of Italy’s shock 1-0 World Cup defeat against Costa Rica on Friday.
"I'm concentrating on the national team and the World Cup," he told reporters. "What comes later, we will see. I know nothing."
Raiola was similarly guarded earlier this week with regard to his client’s future, saying: "Arsenal are a fantastic club," when asked about the report by Sky Sports. "Only eight or 10 clubs in the world can afford Mario Balotelli — like all premium players, and he is one of the greatest. [Will the move happen?] Anything is possible."