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12/14/10 12:45 AM EST

After call from Lee, Rangers must move on

ARLINGTON -- Free-agent pitcher Cliff Lee is headed back to Philadelphia.

The Rangers worked as hard as they could to re-sign Lee, but their pursuit came to an end on Monday when he informed the club that he was signing with the Phillies. Lee apparently took fewer years and less money to re-sign with Philadelphia. Lee agreed to a five-year deal with a vesting option for a sixth season that could bring the total to $120 million.

"Cliff called me," Rangers general manager Jon Daniels said late Monday night. "He was very classy. He was very appreciative of the time he was here and how he was treated. He and his family enjoyed his time here. He also enjoyed his time in Philadelphia and liked some of the things that opportunity had to offer.

"People rag on players for following that last dollar. Cliff didn't do that. I have a lot of respect for him."

The Rangers and the Yankees had been considered the front-runners to sign Lee, but the Phillies have pushed hard since the Winter Meetings and won the pursuit. Lee pitched for Philadelphia for the final two months of the 2009 season and, as he did with Texas this past season, helped the Phils reach the World Series.

Philadelphia traded him to Seattle last winter. The Rangers acquired him from the Mariners on July 9 and have been trying hard to re-sign him. But the Phillies' emergence has left the Rangers and the Yankees on the outside.

Texas' last offer was for $138 million over six years, with an option for a seventh season.

"Ownership took over in August and by the fall they were authorizing nine figure proposals," Daniels said. "Our fans should know they are committed to winning."

The Yankees had made a seven-year offer to Lee, and the Rangers made a series of offers to Lee last Thursday in Arkansas. Neither was good enough.

"We would have liked to have him back, but we weren't able to find terms that made sense," Daniels said. "Cliff will always be a part of the most exciting and special year in Rangers history. It's time to move on and look at a variety of ways to improve the club."

Texas is left with a hole at the top of its rotation in front of C.J. Wilson, Colby Lewis, Tommy Hunter and Derek Holland. The Rangers could renew their efforts to trade for Royals right-hander Zack Greinke or Rays right-hander Matt Garza. They have interest in both, but discussions with Kansas City for Greinke have not been productive.

Texas' other option would be to move closer Neftali Feliz, the American League Rookie of the Year Award winner, to the rotation. The Rangers have also talked about moving setup reliever Alexi Ogando to the rotation.

The Rangers also need to complete negotiations with Vladimir Guerrero to return as the designated hitter after he hit .300 with 29 home runs and 115 RBIs for them this past season. Talks remain ongoing and another designated hitter candidate is coming off the board as the Athletics are close to signing Hideki Matsui.

But getting a No. 1 starter was Texas' top priority and their offseason took a dramatic turn when Lee decided to go back to Philadelphia. The Rangers still believe there are a variety of ways to improve their club with plenty of time before Spring Training.

"We liked the player, but we knew this was a possibility," Daniels said. "We knew it could go either way. It doesn't change the fact that we still expect to win next year. The offseason is far from over."

Lee was 12-9 with a 3.18 ERA with the Mariners and the Rangers this past season. He was acquired from Seattle on July 9 and was 4-5 with a 3.98 ERA in 15 starts for Texas. He beat the Rays twice in the American League Division Series and the Yankees once in the AL Championship Series, allowing the Rangers to advance to the World Series.

Lee lost twice to the Giants as the Rangers went down in five games in the World Series. But he is still 7-2 with a 2.13 ERA in 10 career starts in the postseason. He had six postseason starts with the Phillies. His next postseason start will likely come with them as well.

T.R. Sullivan is a reporter for MLB.com. Read his blog, Postcards from Elysian Fields and follow him on Twitter @Sullivan_Ranger. This story was not subject to the approval of Major League Baseball or its clubs.