Manchester City must look elsewhere for a big-name summer transfer after they were edged out by AC Milan in the battle to sign Barcelona star Ronaldinho.

Blues owner Thaksin Shinawatra had targeted the two-time FIFA World Player of the Year as the marquee signing that would kickstart Mark Hughes' first season in charge at Eastlands but despite reportedly offering more than the £19.8million Barca have accepted from the Rossoneri, they have lost out.

According to Milan, they have reached an agreement in principle to sign the 28-year-old Brazilian on a three-year deal, subject to passing a medical later today and finally ending City's audacious bid for his services.

Barca confirmed in a statement on their website that the initial transfer fee was £16.7million, a figure which could rise to the full £19.8million pending additional payments.

The statement read: "The principle of agreement finally established a transfer fee of 21 million euros (£19.8million), plus four million euros (£3.1million) more in the form of performance-related bonuses depending on AC Milan's qualification, in future years, for the Champions League.

"(Barcelona) sporting director, Txiki Beguiristain, announced that this agreement in principle was reached thanks to the player renouncing his right to 15% of the fee."

The projected fee is nearly £8million less than was reportedly being offered by City, perhaps explaining the player's decision to forego his own slice of the fee.

The agreement followed a day of talks between Barca president Joan Laporta and Milan vice-president Adriano Galliani in the Catalan capital.

"AC Milan and FC Barcelona have reached a principle agreement for the transfer of Ronaldinho to the Rossoneri," read a short statement on Milan's official website.

"The player will be in Milan to undergo the medical examinations and sign the contract that will bind him to Milan until June 30, 2011."

Milan will hope the medical passes without a hitch as they are thought to be determined to unveil Ronaldinho on the same day their squad begins pre-season training.

More news from SportingLife.com