Real Madrid are said to be pushing ahead with plans to snatch Hernandez off rivals Atletico in a £20.5million deal.
Barcelona have also been linked with the 19-year-old, who has impressed on loan at Alaves this season.
But the Liverpool Echo claim Jurgen Klopp’s side are set to weigh in with an offer.
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According to the report, Liverpool have turned to Hernandez after giving up on another transfer target, Sead Kolasinac.
Liverpool have monitored Schalke left-back Kolasinac for months and Klopp’s knowledge of the Bundesliga was considered an advantage ahead of summer talks.
Kolasinac’s contract expires at the end of the season, making him a bargain target that a number of clubs have begun to eye up.
According to the claims, Chelsea, Everton and Manchester City are all preparing contract offers for the Bosnian.
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Liverpool have reportedly dropped their interest in Kolasinac (left) to pursue Hernandez
Sead Kolasinac's contract at Schalke expires this summer
Real Madrid also want to sign Theo Hernandez (right)
Chelsea and City are both set to overhaul their defences this summer and are keen to line up replacements to some of their veteran players.
Everton manager Ronald Koeman, meanwhile, could look for competition for 32-year-old Leighton Baines, with Bryan Oviedo having left the club for Sunderland in January.
And with such strong competition from Premier League clubs it appears as though Liverpool will drop their pursuit of Kolasinac in order to focus on Hernandez.