The 17 year-old left-back is being chased by the country's biggest clubs, including Liverpool, Manchester City and Manchester United.
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However, the Sheffield Star says Chelsea are winning the battle to land Alao.
The agreement would include a high six-figure upfront fee and significant add-ons.
And it's suggested Alao will move to Chelsea immediately this month, with the likelihood of him being registered with the U21 team.
