"She asked for £5m, which was silly money and clearly a negotiating tactic, a silly one at that.
"We... went up to £1m for the series. Everyone thought she would take it, but she didn't. We then walked away - as our feeling was that we wouldn't be held to ransom."
A friend of Dannii's insisted: "A million pounds is a huge deal. There was never any bid made for £5m. If she wanted to do the show, she would have done it."
Kylie's little sister was approached to make her X Factor comeback only a couple of weeks after her boss Simon told of their secret affair in Tom Bower's explosive book, Sweet Revenge: The Intimate Life Of Simon Cowell.
He was quoted as saying: "I was like a schoolboy. She was foxy. She was a real man's girl. Very feminine. It was genuine love. (But) after Terri Seymour, I wasn't ready for another relationship."
> CELEB PICS OF THE DAY
Celeb Pics Of The Day(01 of14)
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Lady Gaga at the W Hotel Taipei, China (Pic: WENN)
Celeb Pics Of The Day(02 of14)
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Lauren Goodger at the Men in Black 3 UK film premiere held at the Odeon Leicester Square (Pic: WENN)
Celeb Pics Of The Day(03 of14)
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Eva Longoria 'Moonrise Kingdom' premiere - during the Opening ceremony of the 65th Cannes Film Festival Cannes, France (Pic: WENN)
Celeb Pics Of The Day(04 of14)
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Nicole Scherzinger leaving the Dorchester Hotel, London (Pic: WENN)
Celeb Pics Of The Day(05 of14)
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Lea Michele and boyfriend Cory Monteith seen holding hands while shopping in Manhattan (Pic: WENN)
Celeb Pics Of The Day(06 of14)
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Freida Pinto 'Moonrise Kingdom' premiere after party at Agora Beach during the 65th annual Cannes Film Festival, Cannes (Pic: WENN)
Celeb Pics Of The Day(07 of14)
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Paula Abdul arrives to the Wendy Williams show in Manhattan New York City (Pic: WENN)
Celeb Pics Of The Day(08 of14)
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Chantelle Houghton, at Pearlys Launch Party at Sanctum Soho Hotel. London (Pic: WENN)
Celeb Pics Of The Day(09 of14)
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Philip Olivier and Ryan Thomas , at Pearlys Launch Party at Sanctum Soho Hotel. London (Pic: WENN)
Celeb Pics Of The Day(10 of14)
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Rita Ora arrives back at her hotel London (Pic: WENN)
Celeb Pics Of The Day(11 of14)
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Holly Valance and Nick Candy leaving the Mandarin Oriental Hotel, London (Pic: WENN)
Celeb Pics Of The Day(12 of14)
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Whitney Port leaving the King's Road Cafe in West Hollywood (Pic: WENN)
Celeb Pics Of The Day(13 of14)
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Kim Kardashian and Kanye West arrive at Zuma restaurant London (Pic: WENN)
Celeb Pics Of The Day(14 of14)
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Lucy Liu at the 2012 CBS Upfronts at The Tent at Lincoln Center, New York City (Pic: WENN)