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30-year-old Butler, who returned to the Saddlers in September, following a Summer switch to Sheffield United, had all but agreed to a further month with the club, before manager Dean Smith opted to sign Leicester City midfielder Michael Cain instead, putting an end to the deal.
Butler, who made seven appearances during his Walsall loan spell, has signed for Rovers until January, with it increasingly likely that he will depart Bramall Lane permanently fairly soon after.