The reigning La Liga and Champions League Champions want Davies, but at a price they can choose.
The transfer activity is really starting to heat up for Bayern Munich. They have already signed Hiroki Ito and are on the verge of completing signings for both Michael Olise from Crystal Palace and Palhinha from Fulham FC while they are also still in the race to sign Xavi Simons from Paris Saint-Germain and Jonathan Tah from Bayer Leverkusen.
In the other direction, there are a handful of key players that could wind up leaving Bayern this summer before the transfer window closes. Joshua Kimmich, Serge Gnabry, Noussair Mazraoui, Leon Goretzka, and Alphonso Davies have all been linked with potential moves away from Munich, though nothing has yet come to fruition for any of them yet. It has become clear that Vincent Kompany is ready and willing to have a bit of a squad overhaul before his first official season as manager of the Rekordmeister gets underway.
For the case of Davies, he has been heavily linked with a move to Real Madrid, though Bayern had re-entered negotiations with the Canadian international to sign a contract extension after a long period of his camp refusing to do so. In the end, though, it became clear that Bayern was not willing to pay the salary demands being asked by Davies’ camp, so there is a possibility he could eventually leave the club.
Per information from The Athletic (via @iMiaSanMia), Real Madrid are still pushing to try to sign Davies this summer, but they are now well ware of the fact that Bayern are ready to face the possibility of letting the player run down his contract. His contract is currently set to expire next summer, so without an extension, he would be able to leave Bayern for Real Madrid on a free transfer next summer.
With the salary offers Bayern has put forth, they are now accepting of the fact that there is not much else they can do except sell Davies for the right offer this summer, or let him go on a free transfer next summer, just as David Alaba had done a few seasons ago.