Manchester United have conceded defeat in their efforts to sign Luka Modric as the Tottenham midfielder edges closer to a move to Real Madrid.
Sir Alex Ferguson made the Croatian playmaker a top target for the summer transfer window but the United manager has been stunned by Tottenham’s £40 million asking price.
Spurs chairman Daniel Levy is likely to accept a £35m bid but United feel the transfer would not make economic sense, even though Modric’s wage demands would be well within the Old Trafford club’s budget.
United have signed attacking midfielder Shinji Kagawa from Borussia Dortmund and Ferguson does not feel pressure to enter the transfer market, particularly as Paul Scholes has extended his contract to play next term.
There had been suggestions that Modric had already agreed personal terms with United but Spurs’ asking price was always likely to be a stumbling block.
Modric, 26, is also a target for Chelsea, Paris Saint-Germain and Anzhi Makhachkala - but the midfielder looks increasingly likely to become Jose Mourinho’s big summer signing at Real Madrid.
Reports in Spain this week have suggested Modric’s representatives have already held talks with Real Madrid president Florentino Perez while the player will re-iterate his desire to leave Spurs in a meeting with Levy this week.
Spurs refused to sell Modric to Chelsea last summer but accept that the former Dinamo Zagreb man is almost certain to be sold this year after the north London club missed out on a place in next season’s Champions League.
“Here I am no longer able to fulfil my dream,” Modric told Marca this week. “I’m going to play in the Champions League - I want to win this competition.”
Tottenham would prefer to sell Modric abroad, rather than strengthen a Premier League rival, while there is a good relationship at boardroom level between Spurs and Madrid.
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Mourinho has been tracking Modric and his Spurs team-mate Gareth Bale - who signed a new four-year contract on Wednesday - for the last three years and decided to make his move at the end of the season.
Modric impressed for Croatia at Euro 2012 and would add creativity to the midfield at the Bernabeu as they look to retain their La Liga title and win the Champions League next season.
Andre Villas-Boas, who is expected to be named as the new Spurs manager in the coming days, is a huge fan of Modric having tried to sign him for Chelsea last summer. The Portuguese, however, accepts the player’s desire to leave and is already involved in the search for potential replacements.
Spurs are expected to complete the signing of Gylfi Sigurdsson from Hoffenheim for £8m early next week but the Icelandic midfielder is not considered a like-for-like replacement for Modric.