Pepe has agreed a five-year deal to move to The Emirates in what will be a club-record transfer.
Pepe, 24, has been on holiday since his country’s Africa Cup of Nations bid came to an end earlier this month, during which time his future has been widely discussed.
Gunners chiefs have been in negotiations with their counterparts at Lille throughout, and are now set to win the race after an ultimately fruitless pursuit of Crystal Palace’s Wilfried Zaha.
Now a deal for Pepe is set to be completed this week, subject to a medical, after a payment structure was agreed with the Ligue 1 side.
A key issue in Arsenal’s push for the international teammates has been how they would pay; their bid for Zaha fell down because the Eagles wanted at least £50million of a potential £75million deal up front.
On the other hand, Lille have proven far more open to receiving a much lower figure in advance – with the rest paid in the coming years – for a player who scored 22 goals in Ligue 1 last year.
As such, the Gunners top brass will hand over £20million upon the deal being completed, with the following £52million being split over the next four years, Lille receiving £13million per year.
For a club whose annual revenue was measured at just £50million by Deloitte 16 months ago, it makes logical long-term sense, particularly when they’re already making a transfer profit this summer, and with Pepe’s potential replacement, Timothy Weah, having already arrived.
Arsenal have targeted both he and Wilf Zaha this summer, with Unai Emery determined to add more unpredictability to their attack; the duo attempted more dribbles than any other player in one of Europe’s top five domestic leagues last term.
Discussing Pepe at the weekend, Emery said: “Pepe is a very good player and also we are thinking only of players who can really, really improve this squad and also give us some different conditions to improve.”
He will become the club’s fourth signing of the transfer window, following the purchases of Gabriel Martinelli and William Saliba – who remains on loan at Saint Etienne – and the loan arrival of Dani Ceballos from Real Madrid .
The Gunners are continuing to negotiate with Celtic over Scotland international left-back Kieran Tierney.
The 22-year-old is Emery’s No.1 defensive target this window.
However, two offers have been rejected so far, with the Bhoys unhappy about the proposed payment structure for their £25million-rated captain; the Pepe breakdown gives them greater room for manouvere.
Napoli, also linked with Tierney, will not be pursuing a deal, boss Carlo Ancelotti confirmed on Sunday.