Walter Smith had hoped to recruit Davis ahead of Thursday night's Uefa transfer deadline for players eligible to participate in the second qualifying round of the Champions League in which Rangers meet Kaunas next week. The deal seemed to have been revived when Fulham approached Rangers to say they had reduced their asking price for Davis, who spent the last four months of last season on loan at Ibrox, from the £4million they initially wanted for the 23-year-old.

"It was Fulham who came back to us," said Smith yesterday, "but even then we have not been able to reach an agreement. That's where it sits at the moment. There is disappointment and frustration for both parties. He (Davis) has mentioned he would like to come to Rangers and we would like to have him."

Another possible target, Pedro Mendes, the Portuguese international midfielder, will not be joining Rangers. The 29-year-old's possible availability was communicated to Smith by Portsmouth manager Harry Redknapp this week, but the player's salary level of around £30,000 a week made him a non-starter for the Rangers manager.

A move for Dickson Etuhu, the Nigerian international midfielder, remains a possibility, although Rangers have been informed by Sunderland manager Roy Keane that he will not sell the 26-year-old unless he is able to sign a replacement first.

Ally McCoist, the Rangers assistant manager, watched Dutch central defender Glenn Loovens play for Cardiff City against Celtic in Faro on Thursday night but no official bid has yet been made for the 24-year-old.

So far, Smith has added three strikers to his squad in Kenny Miller, Andrius Velicka and Kyle Lafferty since the end of last season but he is still keen to add some creativity to his midfield.

Rangers complete their pre-season away to Raith Rovers today

with their £3.75 million recruit Lafferty expected to make his first public outing for the Ibrox club after recovering from a back strain.