It has long been rumored that the 23-year-old, who joined AC Milan from Manchester in January 2013, has been given permission by new boss Filippo Inzaghi to leave San Siro.
But Arsenal are not the only team interested in acquiring the Italian striker, with French giants Monaco also thought to be interested.
If that fee turns out to not be enough compensation for Milan’s liking, footwear giant Puma are prepared to help subsidize the deal. Puma recently agreed to a £30m-a-year deal with Arsenal in January to be their new kit supplier and also have a contract with Balotelli, so there is interest from all parties in getting a deal completed.
Balotelli would offer Arsenal some much needed firepower after the club turned down the opportunity to acquire Cesc Fabregas, who joined rivals Chelsea earlier this month.
Balotelli, who has been as prolific a goal scorer as exists in the world over the last three seasons, scored the game-winning goal for Italy against England in their opening World Cup match on Saturday.
Many Gunners fans are upset that manager Arsene Wenger has let so Arsenal players leave, including defender Bacary Sagna who left for Manchester City.