AC Milan are convinced that they can persuade Mario Mandzukic to snub Premier League interest from Arsenal and Chelsea in favour of a switch to Serie A, with Tuttosport reporting that if Mario Balotelli does leave the San Siro the Rossoneri will react by offering Bayern Munich €20m for the Croatian striker.
Mandzukic looks to have been deemed surplus to requirements by Bayern boss Pep Guardiola despite scoring 18 goals in 30 Bundesliga matches last season, after a very public spat before the German cup final last month.
Arsenal and Chelsea have both been monitoring the 28-year-old's situation very closely, but Milan are now firmly in the race as they look to deliver wholesale improvement on a stringent budget next season.
Balotelli's future holds the key to the deal, with Milan president Silvio Berlusconi refusing to rule out the sale of his strike talisman earlier this week.
Berlusconi's declaration has led to Arsenal weighing up a swoop for the controversial Italian forward, with Balotelli and indeed Mandzukic now both genuine options for Gunners boss Arsene Wenger as he weighs up adding genuine competition for places in attack.
Milan believe Mandzukic could prove a cost-effective replacement for Balotelli if the summer transfer merry-go-round takes their talisman back to the Premier League, but are only willing to offer wages of around €3m-per-season in a salary package for the target man.
Bayern are yet to receive a concrete offer for Mandzukic and the same goes for Balotelli at Milan, but the Rossoneri are putting contingency plans in place that could affect both Chelsea and Arsenal's transfer activity.
Chelsea boss Jose Mourinho has already secured a £32m deal for Atletico Madrid striker Diego Costa, but Mandzukic remains a primary transfer target and it's very much still open to debate where a proven Champions League marksman will end up next season.