Man Utd and Chelsea transfer blow with AC Milan confident striker Rafael Leao will agree new contract

MANCHESTER UNITED and Chelsea have been dealt a transfer blow with Rafael Leao set to sign a new contract with AC Milan.

Leao has been in impressive form this season with four goals and five assists in nine games and the Serie A champions want to reward him with a new deal.

Milan have also decided to act amid growing transfer interest in the forward.

Chelsea were linked with a move over the summer but failed in their £69million bid with Milan demanding Leao's £130m release clause be met.

Leao is also said to be on United's wishlist with the Red Devils sending scouts to watch him in Milan's Champions League match against Chelsea last week.

But the Rossoneri do not want to lose him and Milan director the club's plans to tie him down to a new contract.

He said: "We’re confident to reach an agreement with Leão and extend his contract. We’ll try to find a solution to proceed with Rafa for long time.

"His father’s here tonight, we’ll speak during the dinner.”

The Italian giants will hope to tie Leao down to a new deal before the January window opens, as the likes of United, Chelsea and Manchester City could try to lure him to the Premier League.

Chelsea are said to be favourites for his signature although Erik ten Hag is reportedly a big fan too.

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However, both clubs will have to stump up at least £87m with Milan refusing to do business for lower than that amount.

Leao is in the final 18 months of his AC Milan contract and has so far rejected improved terms.

The Italians are offering him a pay rise of around £110,000 a week on a new five-year deal. But Leao has given no indication of putting pen to paper, giving clubs hope of snatching him away.