From John Harper and Bill Madden:

After two days of internal discussions among front-office executives, the Yankees swallowed hard Friday and decided to offer Phil Hughes to the Twins as part of the trade package they hope will land them Johan Santana.

The Yanks had declared Joba Chamberlain off limits, and the Twins told them that Ian Kennedy, the third of their three prized righthanders, wouldn't be enough. According to the club source, there was spirited internal debate in the organization via conference calls about whether to make Hughes available.

Via Ben.