Bayer end McFadden chase
The Scottish side were asking upwards of £1 million for the 19-year-old and that has put off last season's Champions League finalists.
"We will not be taking our interest further," said sporting director Ilya Kaenzig.
"It is a pity because our coach Klaus Toppmoller had identified McFadden as the sort of young player that would have suited us and fitted in very well.
"We already have some excellent young players coming through and he could have had a big future with us.
"But we will not get involve in a bidding war. If those three English clubs want to, it is up to them."
The identity of the three English clubs mentioned remains unknown although Leeds, Bolton and Leicester have been linked with the Scot in the press.