AC Milan are closing in on an agreement with Wolfsburg for striker Edin Dzeko.

Milan cannot afford to meet Wolfsburg's €25 million asking price for the Bosnia ace, but are willing to include players in their offer to drive down the cash component.

Despite denials from Milan vice-president Adriano Galliani, Wolfsburger Allgemeine Zeitung says a deal was discussed at a dinner meeting last week with Wolfsburg chief Dieter Hoeness.

Milan are willing to offer Kakha Kaladze and Marek Jankulovski as part of a swap for Dzeko.

Wolfsburg coach Armin Veh is open to the proposal as he rates both Milan players highly.