Alexis Sanchez was reportedly inclined to sign a new Arsenal contract but had a change of heart following the club's embarrassing performance in the Champions League last season.

The Chilean's future has been somewhat of a distraction ever since Arsenal failed to lock him up to a new contract and extend his stay in north London beyond next summer when his current deal is set to expire.

Contract talks have fallen silent between the two parties in recent months, with reports suggesting Sanchez will leave on a free transfer after the season.

However, negotiations last season yielded positive results, with news emerging Saturday that he had "shaken hands on the terms of a new contract, according to Matt Hughes of The Times.

The two sides are believed to have reached an agreement in December 2016, but Sanchez changed his mind months later when Arsenal bowed out of the Champions League after a historic 10-2 loss on aggregate to Bayern Munich - the worst result suffered by an English team in the competition.

After the season, Sanchez was linked with a transfer to Manchester City, but Arsenal's failure to secure a suitable replacement scuppered the move up north.

A transfer to Manchester City remains a real possibility, as he continues to be a top target for the Premier League leader.

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City could swoop in for Sanchez in January if there's a hint of interest from a rival club such as Paris Saint-Germain, but it's likely Arsenal will opt to keep him and lose him on a free transfer after his contract expires in June.