"The situation with Villa is 100% finished," Valdano told Radio Nacional de Espana (RNE).

"There was a call from president to president in which Valencia told us that Villa was not for sale."

The Spain striker was one of Real chairman Perez's summer targets as the construction magnate vowed to bring in quality players to Santiago Bernabeu.

Los Merengues have already signed Brazilian playmaker Kaka from AC Milan and reached an agreement with Manchester United to land Portuguese wizard Cristiano Ronaldo.

Real's spending spree has been criticized by several parties. Among the critics were Barcelona president Joan Laporta and former Real director of football Arrigo Sacchi

But Perez, the architect of the Galacticos era in the early 2000s, still intends to spend big.

"We understand that we need to go for an alternative for Villa, which we are working on," Valdano added.