PSG are believed to have offered Villas-Boas a three-year contract, which would have placed him among the three highest-paid managers in world football, as well as unlimited transfers funds.
Baldini’s appointment helped persuade Villas-Boas to stay as he has a strong relationship with the Italian, who recently left Roma and is regarded as one of the best football administrators in Europe.
Villas-Boas has been urging Spurs to recruit Baldini since he arrived at the club and chairman Daniel Levy has always liked the European model of a head coach and director of football.
It remains to be seen how much control over transfers Levy will cede to the new set-up.
According to sources close to Villas-Boas, he is extremely grateful to Spurs and Levy for the opportunity they gave him last summer after he was sacked by Chelsea after only a few months.
He is, nevertheless, extremely keen for the club to back his judgment in the transfer market, having missed out on a series of first-choice targets including Joao Moutinho Oscar, Willian and Leandro Damiao despite deals appearing to be in place.
The head coach is hoping to make Brazilian international Paulinho his first signing of what could be an exciting summer of transfer activity for Spurs.
Talks have taken place with Paulinho’s club, Corinthians, and an official offer is expected soon of at least £15m for the 24-year-old box-to-box midfielder, who is currently starring in Brazil’s Confederations Cup campaign.
Villas-Boas is also keen to improve Spurs’ forward line and has held discussions about acquiring David Villafrom Barcelona. It is understood the 31-year-old Spanish international would like to come to the Premier League and is enthusiastic about joining Spurs.
Villas-Boas’ decision to stay is a severe blow to PSG, who were willing to activate the £10m release clause in his contract.
Interestingly, they wanted to offer him a three- or even a four-year contract which would suggest they are finally giving up on the hope that Arsene Wenger might join them next summer when his deal with Arsenal expires.