Real Madrid have agreed a deal with Malaga to take Spain U21 midfielder Isco to the Bernabeu subject to a medical on July 3.
Isco had previously suggested that he would like to link up with his former Malaga manager, Manuel Pellegrini, at Manchester City and described him as a “footballing father” but he will instead become new Real manager Carlo Ancelotti’s first major signing.
The move will be a blow to the City hierarchy who were hoping to add Isco to earlier signings Jesus Navas and Fernandinho.
Pellegrini will now look to further improve his squad following the departure of Carlos Tevez to Juventus which has left City with just Sergio Aguero and Edin Dzeko as senior squad options up front.