Wolfsburg have moved to beat Arsenal to the signature of Bayern Munich's Luiz Gustavo, with reports in Germany stating that the club have agreed a €20m (£17m) deal for the Brazil defensive midfielder.

The Arsenal manager, Arsène Wenger, who arguably did not replace Alex Song last summer following the player's departure for Barcelona, said on Saturday that he was interested in Gustavo to plug an area of weakness in his squad.

Arsenal valued the 26-year-old at around £14m but appear to have been unwilling to go much higher, allowing Wolfsburg to seize the initiative. The German club have been long-term admirers of Gustavo.

Wenger tried unsuccessfully to sign the Bayer Leverkusen midfielder Lars Bender earlier in the summer – he had an £18.5m inquiry rejected by the German club – and he had previously followed the Toulouse midfielder Etienne Capoue, bidding for him last January. Capoue is now poised to join Tottenham Hotspur for €11m.

Wenger is under increasing pressure to make eye-catching signings. His chief executive, Ivan Gazidis, said that the club have the financial firepower to compete for the very top names but so far they have signed only the France youth international striker Yaya Sanogo on a free transfer from Auxerre.