Real's president, Florentino Perez, turned his attention to the Spanish international after signing Kaka, the Brazilian midfielder, for £59 million and having an £80 million bid accepted for Manchester United winger Cristiano Ronaldo. Villa is expected to be announced as a Real Madrid player in the next 24 hours, with striker Alvaro Negredo moving the other way.
Chelsea had been monitoring Villa's situation at Valencia, with the Spanish club under pressure to strip their prized assets as they lumber under debts of around £400 million, but the former Sporting Gijon forward has always made clear his preference for staying in Spain. Valencia are thought to have turned down an inquiry from the Premier League side for the striker last week.
The move will take Real's spending to around £170 million just two weeks into Perez's second term as president. The construction magnate is believed to have set aside around £250 million to rebuild Real's side, with Villa's Valencia team-mates Raul Albiol and David Silva likely to follow. Perez has been quoted £40 million for the Liverpool midfielder Xabi Alonso and is likely to try to offer Rafa Benitez an exchange to bring that price down.
While Gabriel Heinze, Negredo, Javier Saviola and Arjen Robben have all been mentioned as possible swaps, Benitez may ask for the youth team striker Alberto Bueno or midfielder Ruben De La Red, a long-term target, instead, although he is loath to part with the midfielder.
The completion of the Villa deal is likely to have repercussions throughout Europe. Villa's arrival will signal the end of Real's lingering interest in Karim Benzema, the Lyon striker identified as a potential replacement for Ronaldo by Manchester United manager, Sir Alex Ferguson.
He is still likely to face competition from Barcelona and Inter Milan for the French international, and Barcelona are also likely to push him all the way for the marquee signing of Bayern Munich's French winger Franck Ribery.
Ferguson is also tracking Barcelona striker Samuel Eto'o (reports linking the Cameroonian with Liverpool are wide of the mark) but he has already missed out on one target, after Roma striker Mirko Vucinic said he planned to stay in Serie A.
Ferguson is also interested in Udinese's Chilean winger Alexis Sanchez and he may yet keep hold of Carlos Tevez. Old Trafford sources said chief executive David Gill is doing "everything possible" to keep the Argentine at the club.
Tevez was thought to be close to moving to Manchester City, who are expected to table a bid for the Blackburn striker Roque Santa Cruz this week. Manager Mark Hughes tabled four bids, offering as much as £16 million, in January, but will expect to land his long-term target for around £12 million after an injury-ravaged campaign.
Meanwhile Elano, City's Brazilian midfielder, has admitted he would like to play for both Juventus and Inter Milan. "I spoke with the club and they reminded me I have a contract until 2011 but said that if a good offer arrived, they would think about allowing me to leave," he said.