The Athletic are reporting that the Championship club have ended their interest in the German international, 26, who was flown over to the UK following United's weekend win at Ipswich Town.
A £5million fee had been agreed with the Bundesliga outfit, but after talks on Monday, Leeds officials have elected to abandon their pursuit of the player due to his financial demands.
Meanwhile, ex-Middlesbrough defender Spence is undergoing a medical at Leeds ahead of sealing his switch back to Yorkshire.
The full-back had been linked with numerous other clubs including Bristol City and Swansea City.
Leeds are set to pay a £1m loan fee with no buy clause included in the deal.