Chelsea have completed the signing of Manchester City forward Cole Palmer on a seven-year contract.

The PA news agency understands the club will pay an initial £40million for the 21-year-old academy graduate with an additional £2.5m in possible add-ons.

It is understood a deal was struck on Wednesday for a player City had been keen to keep but were ultimately persuaded to part with by the size of Chelsea’s bid.

“I’m excited to get started and it feels great to sign,” Palmer told his new club’s website.

“I’ve joined Chelsea because the project here sounds good and because of the platform I will have to try to showcase my talents. It is a young and hungry squad and, hopefully, we can do something special here.”

It takes spending in the 16 months since the club was acquired by Todd Boehly’s Clearlake Capital consortium to over £1billion, with Palmer the 12th player through the door during the summer transfer window.

Manager Mauricio Pochettino has stated repeatedly in recent weeks that he has been keen to sign another forward player but would only be tempted back into the market for the right profile of player.

Palmer played 14 times in the Premier League last season as Pep Guardiola’s side won a third consecutive title, and was an unused substitute during their Champions League final victory over Inter in Istanbul.

He began this season by scoring a spectacular goal at Wembley in the team’s 1-1 draw with Arsenal in the Community Shield, a match they went on to lose on penalties.

He was also City’s scorer in the Super Cup draw with Sevilla in Athens last month which ended in a victorious penalty shoot-out.

City assistant boss Juanma Lillo says his club are proud of their Academy product but felt it wrong to stand in his way.

Lillo, who is currently standing in for manager Pep Guardiola as he recovers from back surgery, said at a press conference on Friday: “This is the reality – it’s very difficult to go against a player’s wishes.

“When a player wants to go, it is very difficult to go against that. We have to work out the operation that has value for the club as well.

“On the other side, there is a pride that young player upon player is being created now and starting to give life to the rest of the country, like at Chelsea.

“We have to be proud and satisfied at Manchester City that we have done this, but to deny a footballer the opportunity to do what he wants to do is very difficult.”