Milan Badelj is curently playing for Fiorentina. He joined them in 2014 for €4 million from Hamburg and his current contract runs until summer 2018.
AC Milan have been eyeing the 27-year-old for several months, as they need to substitute their injured player Ricardo Montolivo and Chelsea have joined the race for him now.
While Milan have a lot of urgency and are also a Serie A team, the Croatian is expected to join them rather than Chelsea.
Chelsea do not have the space for another midfielder in their squad and want him just in case someone leaves in January.
The Italian club is willing to make an offer higher than their previous summer offer of €16 million.