The 24-year-old has emerged as an alternative target to Wilfried Zaha at the Emirates Stadium.
Crystal Palace’s versatile forward has been Unai Emery’s No.1 choice to strengthen his attack.
But a deal with the Eagles has been difficult to agree and it appears Arsenal have turned their attention to Pepe.
The Ivory Coast international has a host of top clubs interested in signing him, including Napoli, Liverpool and Manchester United.
Arsenal only have a limited budget to contend with in the final two weeks of the transfer window.
However, it seems they are ready to break the bank to lure Pepe to north London.
According to Italian journalist Tancredi Palmeri, Napoli are fearing the worst after Arsenal leapfrogged them in the race to sign Pepe.
A £72m bid has been tabled to Lille, which would meet the French club’s valuation.
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And Arsenal are ready to hand Pepe a contract worth £4.5m a year.
That equates to wages of around £85,000-a-week.
Additionally, it is suggested Arsenal would also fork out £9m in agent fees to help get the deal done.
That would mean £81m would be spent on signing Pepe ahead of their European rivals.
Italian journalist Gianluca Di Marzio also claims Arsenal have given Pepe’s representatives guarantees on wages and commission fees.
As a result, Pepe’s people are said to be prioritising the player’s switch to Arsenal now ahead of Napoli.
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The Serie A giants may come in with a new proposal, but it seems the Gunners have moved into pole position.
If a deal is completed, it remains to be seen what that would mean for Arsenal’s other business before the window shuts.
A left-back is still desired in the form of £25m-rated Celtic talent Kieran Tierney, while a centre-half is also wanted for this season following William Saliba’s loan back to Saint-Etienne.