He is coming to the end of his current deal with relegated Blackburn, but despite being a free-agent, Rovers want compensation that they are entitled to.
Instead, United have signed Coventry's 18-year-old midfielder Gael Bigirimana for £500,000.
The Sky Blues midfielder is expected to be joined by Aussie Under-20 defender Curtis Good in the next 10 days from Melbourne Heart.
Hoilett is a product of Blackburn’s youth system and as he has been on their books since the age of 13.
The contract rebel would still cost Newcastle in the form of a compensation fee which would be decided by a tribunal that could spiral beyond United’s valuation.
Arsenal, Tottenham and Sunderland have also been linked with the player.