City are to offer to increase the player’s wages significantly, according to a report in the Daily Express.
Pepe lost his place in the Real Madrid team last season to French youngster Raphael Varane.
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Since Guus Hiddink arrived at the helm, Chelsea have improved considerably after a tricky start to the campaign.
Newcastle United are staring down the barrel of relegation to the Championship for the second time in the past eight years.