No chance! Blow for Chelsea as Ancelotti says he won't quit Milan for 24m deal

Chelsea received enough encouragement to offer the Italian a four-year contract at £6m-a-season.

Happy days: Ancelotti jokes with Shevchenko during AC Milan training in 2005

However, last night they were forced to release a statement admitting they had not come to an agreement.

Stamford Bridge officials then apparently suffered a humiliating setback when Ancelotti, 48, said: "I will stay in AC Milan for sure and for many seasons to come. I have not spoken to anyone at Chelsea."

But in a carefully-worded statement, Chelsea did not deny that they had talked to representatives of the Italian, nor that they had made an offer, and it is clear that he is top of owner Roman Abramovich's wish-list of replacements for sacked manager Avram Grant.

The Stamford Bridge club said: "The club have not reached agreement with any individual to become manager, nor have we sought permission from any organisation to talk to their manager."

The mixed messages leave the tantalising possibility of a battle of the billionaires, with Russian oligarch Abramovich facing a duel for Ancelotti with Italian Prime Minister Silvio Berlusconi, who owns the Italian club.

Abramovich appears to have decided on Ancelotti after advice from his personal scout Piet de Visser as well as his inner circle at Stamford Bridge.

Apart from the pre-requisite of a proven track record, they are thought to have been impressed by tactical flexibility and with his ability to handle the media calmly.

But Ancelotti's ability to handle some of the world's best players and not fall out with the dominating presence of Berlusconi is said to have made the biggest impact.

If the Italian does stay at Milan, Chelsea will look towards Luiz Felipe Scolari.

Mark Hughes, who had been linked with the job, is on his way to Manchester City after they agreed a £4.6m compensation deal with Blackburn.

Given Ancelotti's record in the Champions League, one of only five to win the European Cup as both player and manager, it is easy to understand why Abramovich is keen to bring in the manager he believes best able to deliver the trophy he covets above others.

A midfielder in the legendary AC Milan team of the late Eighties, he played alongside such greats as Paolo Maldini and the Dutch trio of Marco van Basten, Ruud Gullit and Frank Rijkaard, who has also been linked with the Chelsea job of late after parting company with Barcelona.

Ancelotti tasted European Cup success in back-to-back seasons in 1989 and 1990. Regarded as the voice of esteemed Milan manager Arrigo Sacchi on the pitch, it came as little surprise that Ancelotti opted to go into coaching.

His first managerial post came with in 1995 with Reggiana, who he guided to Serie A after one season in charge.

A move to former club Parma followed and with it came his first European managerial success, the 1999 UEFA Cup.

Two seasons as Marcelo Lippi's successor at Juventus came next, and two secondplaced finishes in Serie A.

But it was the move to AC Milan in 2001, as replacement for Fatih Terim, which cemented Ancelotti's place in the Italian coaching pantheon.

In his seven seasons at the helm, Milan have won the Serie A title, the Coppa Italia, the Italian Super Cup, two UEFA Super Cups, a World Club Championship and, most significantly as far as Abramovich is concerned, two Champions League titles.

The first European Cup success came with a 3-2 victory on penalties over former side Juventus in 2003 at Old Trafford, the second with a 2-1 win over Liverpool in Athens in 2007.

Having coached the superstars such as Rivaldo, Cafu, Clarence Seedorf, Filippo Inzaghi, Andriy Shevchenko and Kaka, Ancelotti is no stranger to the demands of handling the kind of star-studded dressing room Abramovich is eager to create at Stamford Bridge.