The west Londoners thought they had won the race to sign the Sporting midfielder, even agreeing to pay more than his £52million release clause, but saw their deal hijacked at the eleventh hour by Paris Saint-Germain.
Late on Sunday night, Portuguese newspaper Record revealed that PSG had upped their contract offer to the Uruguayan from €5m (£4.3m) to €10m (£8.6m) – a figure Chelsea cannot match.
The Blues’ new owners have a strategy of offering more modest wages over much longer deals – usually in excess of six years – but they have been blown out of the water by PSG.
Chelsea will now have to go back to the drawing board as they look to rebuild their midfield, with the club expecting to sell Mason Mount and Mateo Kovacic – with their contracts expiring in 2024 – while N’Golo Kante’s deal expires at the end of this month.
According to transfer expert Fabrizio Romano, Chelsea are likely to intensify their interest in Brighton star Caicedo, who they also tried to sign in the winter transfer window.
The Blues had multiple bids rejected for the Ecuadorian in January but he is believed to have a gentleman’s agreement with Brighton that he can leave this summer, with Roberto De Zerbi resigned to losing the 21-year-old.
Chelsea will face significant competition from Arsenal, however, with the Gunners also looking to bolster their midfield this summer.
Mikel Arteta – who is also looking to bring West Ham skipper Declan Rice to the Emirates – is a big fan of Caicedo and saw a bid worth £70m rejected by Brighton in January.
A bid of around £80m should seal the deal this time around, while Caicedo is thought to favour a move to Arsenal over Chelsea due to their participation in the Champions League.
Another potential option Chelsea could explore after missing out on Ugarte is Southampton’s Romeo Lavia, with the youngster – who is also on Liverpool’s radar – expected to be sold following the club’s relegation.
Neither Lavia or Caicedo quite fit the profile of defensive midfielder that Mauricio Pochettino had been looking for, however, with the Argentine having been keen to bring in a specialist holder to sit alongside Enzo Fernandez.
The new Chelsea boss also wants to bring in a new goalkeeper and proven goalscorer to lead the line, while the club need to offload at least a dozen players due to how bloated their squad is.
MORE : Chelsea withdraw from £52m race to sign Manuel Ugarte ahead of Paris Saint-Germain
MORE : Chelsea contract rebel Mason Mount laughs off speculation he’s joining Manchester United
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