The Spurs boss visited Madrid last week to watch the former Manchester United forward and is now readying a £9 million bid for the 31-year-old.
Atletico are struggling in La Liga and it is believed that Forlan is keen on playing in the Premier League again before he retires.
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The arrival of Forlan at Spurs will allow out-of-favour striker Robbie Keane to finally move on from White Hart Lane.
A potential move to Birmingham City fell through earlier this month but it now appears as though a switch to relegation-threatened West Ham is most likely.
The ex-Liverpool and Inter Milan striker will move initially on loan to Upton Park, with a permanent £6m transfer an option in the summer.
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Chelsea's move for Benfica defender David Luiz is on the brink of collapse.
Newcastle could be set to make a shock move for controversial Fiorentina striker Adrian Mutu.
Blackpool will bid for Fulham midfielder Zoltan Gera if Charlie Adam leaves for Liverpool.
Bolton are close to tying up a deal to sign Arsenal striker Carlos Vela on loan for the rest of the season.
Asron Villa defender Curtis Davies will join Birmingham on loan this week.
Source: DSG
