It had been reported by some sources that the 28-year-old had turned down a move to Stoke, but his agent confirmed that Preston were the interested party.
Reading had earlier accepted an offer of £250,000 up-front for the striker, in addition to a further £50,000 that would have been paid depending on appearances.
Following the sensational developments it would be easy to believe that Butts is no longer wanted at Reading Football Club but that is not the case according to his agent.
"Martin is happy to stay at Reading and I do believe that he is still wanted at the club. Every player has a valuation and the Royals would have been prepared to let him go for the right price," said Butler's agent, speaking to Reading Mad.
Signed for £850,000 from Cambridge United three years ago the agent does not believe that at £300,000 Butler, whose performances have been dwindling following form and injury crises, is being undervalued.
"You have to look at the transfer market and see that there is not a lot of money around. There are a lot of loans going on, you can get a lot for your money. What was £600,000 last summer is now £300,000. Reading felt that the offer was acceptable so agreed to let Martin discuss terms with Preston."
Craig Brown's search for a striker is set to go on after it emerged that move for Butler was a no-go. The Lilywhites are without influential goalscorer Ricardo Fuller who has been ruled out for the season with a knee ligament injury.
Pompey ace Mark Burchill is understood to be on Brown's list of possible targets.