The Gunners were heavily linked with the young Schalke starlet throughout January although boss Arsene Wenger repeatedly denied that there was any truth to the rumours.
However the German club's director of sport Horst Heldt hinted that an offer from a club 'north' of Schalke was forthcoming before deadline day.
'It had the dimension of a transfer that you don't do any day of the week,' Heldt told reporters at the Arena AufSchalke.'It was certainly a decent offer, but it wasn't sufficient for us.'
Before deadline day, reports surfaced suggesting that Arsenal weren't willing to pay that figure which caused the plug to be pulled on the deal. Bayern are unlikely to have qualms about handing over that sum for one of the most talented youngsters in Europe.
The Gunners ended up landing Kim Kallstrom on deadline day rather than Draxler to add some cover in midfield - however the Swede has picked up an injury that could keep him out of action for much of the remainder of the season before he kicked a ball in anger for his new club.
Arsenal take on Crystal Palace at the Emirates Stadium later today.