The Gunners have reportedly stepped in and told Sanchez that they would not sanction a move to City this summer, according to the Daily Mirror, and that the striker's only option of an Emirates departure now lies overseas with Bundesliga champions Bayern Munich.
Bayern Munich are reportedly set to launch a bid worth €40 million (£35 million) for Arsenal forward Alexis Sanchez.
"I would say to Sanchez..."
The 28-year-old star is about to enter the final 12 months of his Gunners contract and the player has been strongly linked with a move to Bayern Munich, with Chelsea and Juventus also mentioned as possible suitors.
Speaking to Sky Sports, Nicholas said: "We need a solution to Alexis Sanchez and Mesut Ozil now".
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Sanchez's team are understood to be planning to use Bayern's offer as leverage in further negotiations with Arsenal scheduled for the coming weeks.
"I think Ozil will stay but Sanchez will probably go and losing 30 goals is really damaging".
Sanchez has enjoyed his global career as well, winning back-to-back Copa America with Chile.
It is no surprise then that Arsenal and manager Arsene Wenger would clearly be loath to see him join a domestic rival and are potentially considering accepting less money to avoid such a scenario.
Linked to other Champions league-qualifying sides such as EPL champion Chelsea and Bundesliga powerhouse, Bayern Munich, Arsenal can not afford to surrender another top-flight player to another team without getting nothing in return. They won a trophy in the FA Cup.