Madrid have already snapped up Levante goalkeeper Keylor Navas, Bayern Munich midfielder Toni Kroos and Monaco playmaker James Rodriguez for a combined £90m this summer, but manager Carlo Ancelotti remains interested in bringing another midfielder to the club.
Having seemingly failed to tempt Chelsea into selling Ramires, the club have switched their attention to another Brazilian - Luiz Gustavo. The former Bayern Munich man was a primary target for Arsenal last summer, but chose to stay in Germany and sign for Wolfsburg. Impressive displays in the Bundesliga and at the World Cup have caught Real's attention, who want to pay Gustavo's £26m release clause.
If they do land the holding midfielder, it would almost certainly spell the end for Sami Khedira at the Bernabeu. The German international, who has been linked with both Arsenal and Chelsea this summer, is refusing to sign a contract extension in the Spanish capital, and with just one year left on his current deal, Madrid could cash in this summer.
The news should serve as a huge boost to Arsenal, who still appear to be interested in bringing Khedira to the Emirates Stadium. The 27-year-old is close friends with current Gunners star Mesut Ozil, and with money still available for manager Arsene Wenger to spend, the move could make plenty of sense.
Energetic and powerful, the central midfielder could be the perfect physical specimen to add a different dimension to Arsenal's often technical but hardly robust midfield. Whilst Gustavo would also fit the bill, a move for Khedira would make sense for all parties if the Brazilian does sign for Carlo Ancelotti's side.
With Madrid unwilling to let Khedira run down his contract and leave on a free next year, and the former Stuttgart man eager to leave the club, the situation is going in Arsenal's favour at this point.