Striker Alan Lee has turned down Town's offer of improved terms. The new deal, which would have made the Republic of Ireland international the club's highest-paid player, was offered in the wake of Hull City's interest in the 29-year-old.
Chairman David Sheepshanks said: "We have spoken about a new contract with Alan. I don't know that it meets with his valuation at the moment but it is an improved, extended contract that would make him the highest paid player at the club. We will have to see how this plays out.”
Hull are understood to be ready to offer Lee a three-year, £8,000-a-week deal and have had bids of £400,000 and £600,000 refused by the Blues.
Town have repeatedly said they don't want to sell the former Cardiff man, but would consider a significant offer for last season's 17-goal top scorer if they receive one. Talks regarding the new deal are expected to continue.
Lee himself is understood to want to stay at Portman Road and is settled in the area, but may feel that with 30 approaching, his next contract will be his last big deal in football.
Hull have not yet made a third bid but manager Phil Brown said yesterday that he has not yet given up on landing Lee: "They have got an estimation of what they think he is worth and that is above our estimate at this time. It's ongoing."
Coventry City have also been linked with Lee this summer but their interest appears to have cooled in recent weeks.
Town have confirmed Derby County's interest in Lewis Price, although reports in the Midlands suggest the Rams have enquired about more than one keeper.
The Blues have denied tabloid reports yesterday linking midfielder Owen Garvan with Derby and Millwall.
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