Real Madrid have decided to cash in on Arsenal target Sami Khedira for just £16 million - in what will be their last chance to make a profit on the player.

Even though the German midfielder had an excellent World Cup and played a crucial role in Germany's 7-1 semi-final victory over Brazil, El Confidencial reports that Los Blancos are likely to part company with him a year before his contract ends next summer.

Last season the Champions League winners turned down a £30 million offer from Manchester United, but they're now willing to let him go after Khedira is said to have refused to sign a new deal in October. It's thought that Los Blancos would rather have £16 million for the player now, rather than letting him go for no fee at the end of the season.

Real Madrid signed Khedira for a cut-price £12 million in the summer of 2010 in an identical situation - with him having just one year left on his contract at Stuttgart.

And although Khedira became a key player under Jose Mourinho, the Real Madrid officials believe that last season Carlo Ancelotti managed to cope with his long-term absence without any problems.

El Confidencial reports that Los Blancos have already pencilled in Brazil international Luis Gustavo as his replacement.

Chelsea and United have been linked with Khedira in recent months, but Arsenal look to be the favourites to secure his services.

Recent reports have also claimed former Real Madrid teammate Mesut Ozil has been trying to convince the player to join him at Arsenal where Arsene Wenger sees him as the perfect long-term replacement for Mikel Arteta.