Valencia are close to signing Real Madrid's Spain Under-21 international midfielder Sergio Canales on loan.
Los Che president Manuel Llorente has revealed that negotiations between the two sides are ongoing.
Canales, 20, played just ten games at Madrid last season following a €6million move from Racing Santander last summer and the club are willing to loan him out to rivals Valencia.
"It (the Canales transfer) is a matter we are working on and when there is news we will tell it," said president Llorente.
Canales, contracted at Real until June 2016, is expected to join on a season-long loan with an option to buy for €12million although Madrid will have a buy back clause on the midfielder.
Canales, who has rejected a number of English clubs to stay in Spain, is being tipped as a replacement for Spain international Juan Mata.
Mata is a target for a number of clubs with Arsenal understood to be leading the chase, although Valencia insist they have not had any bids.
"(Juan) Mata is in Lisbon and at the moment he is our player," said Llorente.
"I think it will continue that way as we haven't received anything."