Sky Sports reports that a £20 million deal is close to being agreed. The Blues’ interest in the Ghana international emerged last week, with negotiations continuing after an initial bid was rejected.
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Everton, West Ham and Besiktas were also linked with the 22-year-old, but Portman Road now appears to be his likely destination.
Fatawu joined Leicester from Sporting CP in 2023 and made his move permanent after helping the club secure promotion to the Premier League.
He impressed in the Championship last season, scoring nine goals and providing seven assists, although he could not prevent Leicester’s relegation.
Ipswich are also working on deals for goalkeeper Kayne van Oevelen and Union SG’s Kjell Scherpen.