A short-term injury to Matija Nastasic is increasing City's desire to bring in the defender, with Manuel Pellegrini already one short after seeing Kolo Toure depart to Liverpool.
As with every transfer, there is a ripple effect created in the market; and one club who could be harmed by the deal are rivals Manchester United.
United have been pursuing Ezequiel Garay as a long-term target, with the 26-year-old Benfica defender said to be happy to move.
At present United have not met the asking price of €20 million for the Argentine, but may find themselves backed into a corner.
This is because Garay is likely to be high on a list of potential replacements for Pepe at Real Madrid.
The fee for Pepe will not simply be placed into a 'Gareth Bale fund', because Madrid remain lighter than they would like at centre-back.
While Sergio Ramos is a fixture, Raphael Varane is coming off an injury and former player Garay can come into the equation.
Garay previously played at Madrid before joining Benfica, a bit-part player previously, but having established himself will feel confident of holding down a regular spot.
Madrid would stand to gain 50 per cent of any transfer for Garay if he went to another club, but this is unlikely to hold them back from signing him, given that they can effectively buy him for the same price they would sell Pepe for, a straight swap for a younger and more stable player.
Manchester United may be focusing on their midfield, not very successfully either at present. If they are serious about signing Garay they may find their attentions temporarily diverted, or if not - regret stalling on signing a player regarded as one of Europe's top centre-backs.
How heavy do you feel United's interest in Garay presently is?
image: © Jan Solo