The wing-back appears to be surplus to requirements at his current club, and could be on his way to the Sicilian outfit this summer
The Algeria international joined Milan from Lecce in the January transfer window, but has since been unable to make an impact at the Rossoneri.
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"Negotiations are taking place with Palermo over Mesbah," Galliani stated to Sky Sport Italia.
"If we indeed sell him this summer, we will not bring in a replacement for him."
Mesbah has a contract with Milan until June 2016.