Both Chelsea and Manchester City have a long-standing interest in the 27-year-old Columbia international, who is rated in the £50million bracket.
It will spark a bidding war between the two big-spending Premier League clubs and Chelsea could try to offload Fernando Torres back to his former club as part of any deal.
Real Madrid are also likely to try to strike a deal with their fierce rivals to land Falcao, who still has three years of his contract to run.
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