Arum confirmed the announcement over the phone from his vacation home in Los Angeles, California accoding to Kevin Iole of Yahoo Sports.
The fight which will be offered on HBO will take place in either Las Vegas or Monterrey in Mexico.
If Margarito gets back his license to fight in Las Vegas in a couple of days, the fight will take place at the MGM Grand Garden Arena.
However if the state of Nevada declines his license application, the fight will be held at the 22,000 seat arena in Monterrey, Mexico.
Abu Dhabi in UAE is also being considered as a possible venue.
In February 2009, Margarito was suspended by the California State Athletic Commission for alleged involvement in the illegal hand wraps insertion during his fight with Shance Mosley.
Margarito has fought only once since his controversial fight with Mosley and that was against Roberto Garcia which he won via a unanimous decision.
Arum explained why he chose Margarito over the Puerto Rican Miguel Cotto. He said, he made the choice because it would be perceived as a more competitive bout.
“Cotto was beaten and even with [Hall of Fame trainer] Emanuel Steward now with him, I don’t think people believe that it’s enough to make a difference and I’m not sure they would buy it as competitive,”
“But putting aside the controversy about the wraps, the one thing you know for sure with a Margarito fight is that it will be a hell of a fight for however long it lasts.
“Margarito knows only one way to fight and that’s coming forward. They’re going to get in there and fight. That’s what people want to see.”
Boxing fans from around the world have waited for over a year for the highly hyped Pacquiao-Mayweather match to happen.
Unfortunately, undefeated American boxer Floyd Mayweather Jr failed to sign a deal with Pacquiao for the fight to happen in November.
The Mayweather camp said they were not aware of any direct negotiations taking place with Pacquiao's promoter Bob Arum, a situation that enraged boxing fans who have waited for over a year for the mega fight to happen, only to be told after a long wait that no negotiations actually took place.
For his part Arum said he assumed Mayweather was not ready to fight this year citing some "roadblocks" including among others, his uncle's court case which could affect his training. His uncle Fred, who is a respondent in a Nevada court case, serves as Mayweather, Jr's trainer.
Many boxing fans believe the Pacquiao-Margarito fight is a mismatch. The fighter's profile show Margarito is physically superior than Pacquiao in terms of height and reach.
Margarito stands at 5'11" with a reach of 73 inches against Pacquiao's 5'6.5" and a reach of 67".
Clearly Margarito has a whooping six inch advantage in reach and almost five inches in height.