Scott Baker said he had a good conversation with Twins General Manager Terry Ryan on Monday, when he called with news that the team was declining the righthander's $9.25 million option for 2013.

"I think we've kind of known [the option] wasn't going to get picked up," Baker said in a telephone interview. "He was very nice letting me know they'd like to have me back."

Baker, who missed the 2012 season recovering from Tommy John elbow ligament replacement surgery, is now a free agent and will be able to receive offers from other teams beginning at 11 p.m. Friday night. But the Twins are still very much in the running to re-sign him, with the sides working on an incentive-based deal.

"We're talking, and obviously I think there's a mutual feeling that I want to be back, and they want me back," Baker said. "But it has to make sense for both parties, and we're just not there yet.

"There's a lot to consider. I'll just say, we're not close, but we're definitely closer than when it started. I'm by no means discouraged by anything that's gone on so far. But at the same time, there are great teams and other possibilities out there."

Ryan called Monday's decision on Baker "a paper move."

"I don't think anybody expected us to pick up that option," Ryan said. "We certainly have the ability to talk to Scott and his agent right through the [free agency] period."

The Twins did not have to pay a buyout to get out of the option, which was part of the four-year, $15.25 million deal Baker signed in March 2009.

Baker is 63-48 with a 4.15 ERA since first joining the Twins in 2005. In 2011, he appeared to turn a corner and ranked among the best pitchers in the American League at 8-6 with a 2.86 ERA through the end of July, before coming down with arm trouble. He had Tommy John surgery on April 17 and has been very encouraged with his rehab.

"I'm just as strong, if not stronger, as I've ever been," he said.

Besides Baker, two other Twins players officially became free agents Monday following the completion of the World Series: righthanders Carl Pavano and Matt Capps.

Blackburn has surgery

Righthander Nick Blackburn had arthroscopic surgery to remove a bone chip from his right elbow last Thursday, but the team expects him to be full strength for the start of spring training, Ryan said.

Blackburn, 30, was taken off the 40-man roster after going 4-9 with a 7.39 ERA in 19 starts this year. He will be in big league camp next spring as a minor league invitee, as he is under contract for $5.5 million in 2013.

Walters re-signs

The Twins re-signed righthander P.J. Walters to a minor league deal with an invitation to spring training. Walters, 27, began his Twins career with four quality starts in May but came down with a right shoulder injury that cost him nearly three months. He finished the season 2-5 with a 5.69 ERA.

Gibson roughed up

Kyle Gibson went 3-0 with a 0.69 ERA in his first three Arizona Fall League starts, but Monday wasn't nearly as smooth. The righthander gave up six runs on eight hits over two innings, with one walk and one strikeout, raising his ERA to 4.20. Gibson, who had Tommy John surgery on Sept. 7, 2011, threw 28 of his 50 pitches for strikes.