The promising Spaniard has been one of the Gunners’ top targets for some time, and was heavily linked with a move from the Bernabeu to the Emirates Stadium during last summer’s and January’s transfer windows.
A fresh offer to land the 21-year-old in the coming months has been on the cards for some time, but now Spurs are also in the battle.
The Lilywhites are another side to have been linked with the highly-rated goal-getter, and now chairman Daniel Levy is thought to be ready to sanction a £12m offer.
Spurs are believed to be desperate to add to their attacking armoury in the off-season, with big money 2013 signing Roberto Soldado having endured a disastrous debut campaign.
Emmanuel Adebayor’s future is also unclear with reports linking him with a switch to Monaco, while Harry Kane is seen as too inexperienced to be a regular starter.
As well as the north London duo, Liverpool have been linked with the Los Blancos ace, as have Juventus and Inter Milan.