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Arsenal transfer news: Sami Khedira will stay at Real Madrid, insists Carlo Ancelotti

Arsenal suffer a set-back in the transfer market ahead of the deadline

Real Madrid manager Carlo Ancelotti has appeared to call an end to Arsenal's pursuit of Sami Khedira after announcing that the German international wishes to stay at the Santiago Bernabéu.

Khedira has just one year remaining on his contract with the La Liga giants and has attracted interest from Manchester United and Bayern Munich as well as Arsene Wenger's Gunners.

The FA Cup holders had hoped to complete a deal before the end of the transfer window, despite the £200,000-a-week wages being a stumbling block, but are now looking elsewhere after the 27-year-old opted to remain in Spain.

"Khedira is happy here and he is staying," Ancelotti told the press. "The matter is resolved and he stays at Real Madrid."

German newspaper Bild reported last week that Khedira had asked to leave Madrid after the Champions League winners invested around £100m to sign both James Rodriguez and Toni Kroos.

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Wenger, on the other hand, must now switch to other targets if he is to find the defensive midfielder he has sought all summer.

One option is using Jack Wilshere in the role, but the England international has come under scrutiny for a series of poor displays and off-field problems.