I still have a lot of mates close to Arsenal and am being told the situation is as follows:
Arsenal want Sanchez to go to United, because United are offering £35m plus Mkhitaryen (which is a bit mad for a player who will be free in 5 month imo), they get money and a decent player.
Sanchez wants to go to City, why I dont know, whether its the whole Pep thing, or whether they are offering him a better contract who knows.
Arsenal are refusing to accept City's deal and City will not raise it (£35m straight, no player), but AFC have accepted United's bid, but Sanchez does not want to talk to United and is threatening to run his contract down and leave on a free if the Arsenal board don't let him go to City, and the delay is the Arsenal board trying to persuade (or bribe) his agent into convinving Alexis to go to United.
That's what I have been told from a pretty reliable source.
So it remains to be seen whether they can twist his arm and convince him to join United, or whether Arsenal cave and let him go to City, or whether both parties stick to their guns and Alexis signs a pre-contract with City now and leaves for nothing in May.