ENGLEWOOD, Colo. -- Daiyan Henley will not be with the Denver Broncos after all.
The Broncos announced via social media late Wednesday night that the trade to acquire the linebacker from the Los Angeles Chargers "will not be finalized.''
Neither team disclosed official reasons for why the trade was scuttled, but sources told ESPN that the Broncos discovered an issue with one of Henley's knees when the linebacker had a physical Wednesday. The Broncos, upon initially announcing the trade Tuesday, included that the deal was "pending a physical."
After the physical, the Broncos approached the Chargers to discuss a different version of the trade that included different draft picks, according to sources. But the teams ultimately did not agree to terms, so the trade was nixed, sources said.
The Broncos had agreed to send a 2027 fourth-round pick and a 2028 fifth-round pick to the Chargers in exchange for Henley, who would have gone from a winless team to the one currently in first place in the AFC West.
Denver's revised trade terms gave Los Angeles the option of either a fourth-rounder and a seventh-rounder for Henley, or a fourth-rounder and another pick flip, sources told ESPN's Adam Schefter.
The unprocessed trade will be noted as a "failed physical," but the Broncos still had interest in acquiring Henley under those new terms, sources told Schefter. The teams were unable to agree on revised compensation, however.
Neither Broncos coach Sean Payton nor general manager George Paton publicly commented on the trade Tuesday or Wednesday. Denver is on its bye week, and Payton gave the players the week off.
"We have great respect for Daiyan as a player and person, and we wish him all the best moving forward," the Broncos said in their statement.
Henley, who will turn 27 in a week, is in the final year of his rookie deal and is scheduled to become an unrestricted free agent in 2027. He was a third-round pick by the Chargers in 2023 (85th overall).
The Chargers posted "Welcome back, Daiyan'' on social media late Wednesday, shortly after the Broncos' announcement.
Henley has been a healthy player with 41 starts in 42 games over the past three seasons combined, including the Chargers' eight games this year.
The Broncos (7-2), who are on a five-game winning streak, had been in pursuit of additional depth at inside linebacker for a defense that ranks 23rd in run defense. Alex Singleton is in the midst of one of the best years of his career as well, but he also leads the league's defensive players with 617 snaps played over the season's first nine weeks.
The Broncos have also played more defensive snaps than any team in the league, 618, and Singleton, 32, has missed just one of those. Singleton and Justin Strnad have been the starters at inside linebacker all season.
Henley has a team-high 51 tackles for the Chargers this season and was the Chargers' leading tackler in each of the previous two seasons with back-to-back 100-tackle seasons. Henley has 317 tackles, five sacks and four interceptions in 56 career games with the Chargers.
Denver will next play again Nov. 22 against the Las Vegas Raiders in Denver.