Espanyol rejected a final deadline day bid from Arsenal for Joan Garcia.
The Gunners took Neto on-loan from Bournemouth for the season before Friday's transfer deadline.
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But that wasn't before they had a new €20m offer for Garcia rejected by Espanyol.
Espanyol coach Manolo Gonzalez had always said publicly that his goalkeeper would not leave for less than his €30m buyout clause.
Garcia had agreed personal terms with Arsenal, though sources insist he is happy to stay with the Pericos this season.