Birmingham face competition for McFadden
Everton had given Birmingham permission to speak to McFadden after accepting a fee in the region of £5.5million.
Blues boss Alex McLeish was hopeful of signing the former Motherwell youngster upon the completion of a medical and successful talks regarding personal terms.
But the transfer has not gone through, with McFadden now understood to be ready to meet with a second club.
Scottish champions Celtic have previously tried to sign the versatile attacker on loan, but the identity of the new bidders has not been disclosed.