The Blues looked close to taking the Republic of Ireland international striker to St Andrew's after agreeing a £6million fee with Spurs for his services last week. However Pannu has confirmed that Keane's wage demands, while not excessive for a player of his calibre, are too high for what the Blues would be comfortable paying.
He told the club's website: "I met with (manager) Alex (McLeish) and (chief scout) Paul (Montgomery) today to discuss some new targets - names that we will not be mentioning at this moment in time - as we have decided that the signing of Keane would not be in the best financial interests of the club.
"Everyone knows he is a tremendous player but having considered the overall package (one which certainly wasn't unfair on the part of his representatives to ask for given his talent and experience), Keane's age and the length of contract we felt that financially he wasn't the best option available.
"This is unfortunate because Keane is a class act but supporters can rest assured we are considering other options and will pursue them where financially viable."