Talks between Kilgallon and recently appointed Chief Executive Trevor Birch have been ongoing, but the attempt to lure the 25-year-old to put pen to paper on an extension to his contract at Bramall Lane have failed.
It's now all about the fee Kilgallon leaves for. The Blades paid £1.75m for his services, but a mere price of £600,000 is being touted around.
Newcastle have been keen to bring the former Leeds man to St James' Park, and are still pursuing. A host of top-flight clubs will now also be alerted to the news that Kevin Blackwell broke out in the Yorkshire Post.
He said: "It is a fete accompli that 'Killa' will be going. He spoke to Trevor Birch but we can't reach an agreement. At the moment, this club is not in a position to offer outrageous terms to anyone. We can't afford to pay the terms we used to.
"With the interest that has been shown, it will be difficult to keep him. There is significant interest from a few Premier League clubs now as well as one or two in the Championship."
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