Birmingham boss Steve Bruce says the club is close to agreeing a �3m deal to sign Jermaine Pennant from Arsenal. Bruce said: "Our managing director Karren Brady has virtually done a deal for Jermaine and the next step is to agree terms with the player."
Birmingham will pay an initial �500,000 with the remainder of the fee depending on appearances and incentives.
Pennant, 22, is serving a three-month sentence for drink-driving offences but he is eligible for parole on 31 March.
If he is released early, Pennant will have to wear an electronic tagging device.
Birmingham have agreed to ensure Pennant meets other parole conditions, such as observing curfews.
Bruce signed Pennant on loan in January when he knew the player faced a possible custodial sentence.
Pennant made four appearances for his new club before he was handed a prison term but that was enough to persuade Bruce of his potential.
"We said from the minute he came here that we would like to make the deal permanent and we've seen how good a player he is in the few games he has played," he said.
"I think he appreciates that there is someone who is willing to try and help him rather than just wash their hands of him.
"Sometimes people need help and education rather than just being battered.
"Before the sentence we got Jermaine a flat up here, we got him away from the distractions of London and we had someone with him for the best part of every day.
"We will do everything we can to try and keep him on the straight and narrow.
"He's done wrong and we've all done stupid things when we were younger and he admits that now.
"He has got the chance now to get his life back in order."