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The Cubs have emerged as a front-runner in the Peavy sweepstakes, perhaps even ahead of the Braves, according to major-league sources.
The club also is willing to give Dempster a four-year contract, sources say, a decision that should put them in good position to retain the free-agent right-hander.
However, the Braves remained strongly in the mix for Peavy as they left the general managers' meetings on Friday, and their advantage over the Cubs is that their young talent is closer to the majors.
Even though the Cubs are for sale, team officials apparently believe that they can absorb the four years and $63 million remaining on Peavy's contract while committing at least $50 million to Dempster over the same term.
If the Cubs acquired both pitchers, they might need to part with free-agent closer Kerry Wood, reduce their payroll by trading right-hander Jason Marquis and others and pursue a more inexpensive left-handed hitting outfielder than they previously planned.
Their rotation, however, would rank as one of the game's best.
The Padres are seeking young pitching in any deal for Peavy, who has a full no-trade clause but has informed the club that he is willing to go to one of five National League teams. The Yankees will become a viable option only if the Padres fail to reach agreement with one of Peavy's preferred clubs.
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