Italian and Spanish media report that Kaka has agreed to join Madrid for a world-record fee of £62 million.

Both parties have supposedly agreed to a five-year deal worth S$18 million a season. Kaka's father and agent, Bosco Leite apparently also agreed to the terms of the contract, but held off officially signing the paperwork.

One of the reasons for this hesitation may have been a sensational last-minute increased offer from Chelsea owner Roman Abramovich, which is said to have enticed Kaka's father, who is also arguing over his own commission from the transfer.

According to Milan sources though, the transfer has indeed taken place behind closed doors, although club president and Italian prime minister Silvio Berlusconi apparently does not want the transfer announced until next week.

Real Madrid president Perez had earlier hinted that the deal was underway, stating: ""We started working today and we will lay the foundations to create a magnificent team. Kaka could be one of our objectives but the prices the media are talking about are really out of the reality. Some things can last for days, others for months. We have time until 31 August."

Kaka is said to prefer a move to the Primera Liga rather than the Premier League, despite Chelsea recently appointing former Milan manager Carlo Ancelotti as coach.

The signing would be a huge blow to Chelsea, with both new manager Ancelotti and owner Abramovich putting Kaka on top of their summer wish list.

Chelsea representatives have even made moves to set up a face-to-face meeting between Kaka and Abramovich to hopefully persuade the Brazilian into a English move.

Chelsea have offered Kaka a £150,000 a week which would make him the highest paid player at the club, eclipsing John Terry and Frank Lampard, who currently earn£135,000 per week.