Real Madrid are believed have beaten both Manchester City and Chelsea in the race to sign Spanish wonderkid Sergio Canales.

The Racing Santander teenager's father has revealed that his son has opted to join the Spanish giants on a five-year deal, thereby wrecking the Premier League duo's hopes of landing one of Europe's hottest properties.

"The decision was Sergio's and he thinks that Real offer the best option in a sporting sense," said Angel Canales, Sergio's father and agent.

Whilst Racing are set to receive some €6million in compensation, news of the 18-year-old prodigy's decision will come as a blow to City who had sent representative to speak to Canales this week.

According to The Sun newspaper, chief scout Mike Rigg and financial officer Graham Wallace flew to Santander in a bid to lure Canales to Manchester.

The paper also reported that Angel Canales had already been to Manchester to watch City and look at the training facilities.