They have probably been told he wont be sold. City on a free in 12 months time would be my guess.
Who will be the winner of this ? It seems both Arsenal and City won't get what they want if the deal is done on free next summer.
Arsenal won't get a single pound of this transfer, but City will take Sanchez at his 30 for probably 2 more seasons at the highest level at best before starting the decline.