Chelsea are being linked with a £15 million move for Uruguayan international striker Abel Hernandez.
However, the Blues face competition from Real Madrid, according to talkSPORT, with both clubs sending scouts to watch the talented 21-year-old.
The report goes on to claim Chelsea have monitored the player's progress in Italy 'extensively', with the Blues well aware of a contract that is set to expire in 2013.
Palermo are keen on tying the player down to the club long-term, and are hoping to secure a contract extension in an effort to ward off the interest of clubs across Europe.
The £15 million price-tag is another step towards fending off possible suitors, but Chelsea boss Andre Villas-Boas is known to be in the market for the continent's top young players.
Romelu Lukaku, Juan Mata and Oriorl Romeu all arrived at Stamford Bridge this summer, whilst Kevin de Bruyne and Marek Hamsik have also been linked with moves to Chelsea in recent months.
Competition with Los Blancos will undoubtedly be fierce for the player's signature, but AVB will be hoping the sprinkling of South American talent in west London will persuade Hernandez over a move to Chelsea.