Sky sources understand that Aston Villa have agreed to pay Birmingham £2million compensation for Alex McLeish's services.
McLeish is set to cross the Second City divide on a reported three-year deal after resigning from the Blues on Sunday.
The former Rangers and Scotland manager had two years remaining on his contract, and Birmingham subsequently accused their neighbours of tapping him up.
The Blues wanted compensation of £5.4m from Villa but their threats to report Villa to the Premier League or to take out an injunction to prevent his appointment failed to materialise.
And it now seems the affair has reached a successful conclusion for all parties with a £2m payout agreed and McLeish set to be confirmed as Villa boss on Friday morning.
The appointment comes despite some Villa fans being unhappy with his switch.
Hundreds gathered at the ground on Wednesday night to voice their disapproval, while graffiti was daubed at the club's Bodymoor Heath training ground.
But Villa owner Randy Lerner, who met McLeish for 'productive' talks on Wednesday, has pressed on with the appointment process and the former Blues boss is set to take over the Villa helm vacated by Gerard Houllier.
McLeish came into the Villa reckoning after Roberto Martinez opted not to leave Wigan last Friday.
What initially seemed an unlikely option became the source of intense speculation after McLeish tendered his resignation at St Andrews on Sunday.
The whole process of appointing Houllier's successor has continually wrong-footed bookmakers with other initially backed candidates such as Mark Hughes and David Moyes proving way off the mark.
Rafa Benitez was also mentioned but apparently fell out of contention after asking for certain transfer guarantees.
Villa want McLeish to restore stability after a difficult year which began with the sudden resignation of Martin O'Neill five days before the start of last season.
His replacement, Houllier, made a number of PR gaffes and was involved in a relegation battle before leaving the club after a health scare.
McLeish had been in charge of Birmingham since 2007 following previous spells with Motherwell, Hibernian, Rangers and Scotland.