Manchester City ended their pursuit of Riyad Mahrez after Leicester City demanded a package valued at a “crazy” £95m, with the Premier League leaders valuing the forward at no more than £60m.

It is understood City never made a formal bid for the Algerian. Instead informal talks took place between their chief executive, Ferran Soriano, and his opposite number at Leicester, Susan Whelan, to try to establish a ball-park figure to initiate negotiations.

However, on Wednesday morning the Midlands club proposed a deal that would have included a City player as part of the £95m deal. Soriano and Txiki Begiristain, City’s sporting director, balked at the price and decided Mahrez, who is contracted until 2020, was not worth the fee. The City executive felt the valuation was “crazy”.

City had turned to the 26-year-old after they decided against signing Alexis Sánchez from Arsenal because of his proposed fee. Pep Guardiola still wanted a wide attacking player and Mahrez was identified as a potential target, rather than as a stop-gap replacement for Leroy Sané, who injured ankle ligaments in Sunday’s 2-0 FA Cup win at Cardiff and is expected to be out until the end of March – an absence of 11 matches.

On Tuesday when it first emerged City were interested in Mahrez, Guardiola said it would be difficult to sign him. He referred to the club record signing of Aymeric Laporte that day. “It’s so difficult,” he said. “It happened with Laporte because he had a buy-out clause [at Athletic Bilbao]. When you have to negotiate it’s always so complicated.”

The big question for Leicester is how Mahrez will react to the disappointment of missing out on the big move that he has craved since the Premier League title success in 2016. He cut a disillusioned figure for much of last season and made it clear in the summer that he wanted to leave, submitting a transfer request in May and releasing a statement saying that he was “fiercely ambitious” and felt “this is the time for me to move on”.

Although Roma were interested, Leicester’s valuation was never met and as the clock ran down on that summer transfer window, Mahrez, rather bizarrely, spent deadline day at an airport, hoping and waiting for news that he should jump on a flight. The call never came, however, forcing Mahrez to return to Leicester after the international break.

He has recaptured his best form at times this season, scoring eight times in the Premier League, yet Leicester could be forgiven for having concerns about how Mahrez will respond to the realisation that he could have been playing for Guardiola’s side.