Reports on Wednesday suggested Shevchenko could return to Milan in what would initially be a season-long loan deal following a meeting between former club president Silvio Berlusconi and Chelsea owner Roman Abramovich in Sardinia last Thursday.

Rosseneri director Silvano Ramaccioni announced on Wednesday that a deal was close, while the Italian press claimed the deal would be finalised on Thursday or at the latest 24 hours later.

However, Galliani revealed on Thursday that the proposed loan deal fallen through.

"Negotiations for Shevchenko are at the moment frozen," he told Gazzetta dello Sport.

"Milan had wanted to take the player on loan with the right to buy him, but Chelsea said no because they wanted us to buy him outright.

"Therefore negotiations are through."

The news appears to signal the end of Milan's summer-long pursuit of a player who has endured two disappointing years at Stamford Bridge following a big-money move from the Italian giants in 2006.

The Ukraine striker remains a firm favourite at the San Siro, where he still stands as the club's second-most prolific goalscorer of all-time having scored 127 goals in 208 games during a seven-year career.

:: Chelsea have signed Portuguese winger Fabio Paim on a season-long loan from Sporting Lisbon.

:: Marseille defender Gael Givet is set to leave the club in the next seven days, with club president Pape Diouf revealing talks are on-going with Panathinaikos and unnamed English clubs.

:: Sunderland have followed up the signing of Djibril Cisse with the capture of Fulham striker David Healy for an undisclosed fee.

:: Espanyol sporting director Paco Herrera has re-iterated there have not been any enquiries from Liverpool or any other club for winger Albert Riera.

:: Hamburg have accepted a bid from Manchester City for Belgium defender Vincent Kompany, according to the German club.

:: Portsmouth have signed Arsenal's French left-back Armand Traore on a one-year loan deal at Fratton Park.

:: SOUTHAMPTON have completed the signing of young Chelsea midfielder Jack Cork on loan until January.

:: Dunfermline manager Jim McIntyre has revealed that WATFORD have shelved plans to sign Ivorian defender Sol Bamba.

:: LUTON have signed LEICESTER goalkeeper Conrad Logan on loan until January

:: Bolton manager Gary Megson has confirmed he would love to take Jimmy Bullard to the Reebok Stadium as part of a last-gasp dash for new players before the end of the transfer window.

:: Ajax have announced the signing of Celtic midfielder Evander Sno on a three-year contract.

:: Poland international Arek Radomski has reached an agreement to join NEC Nijmegen on a two-year deal.