The Canadian international has a contract until 2025, meaning he will have a year left on his deal by next summer, alerting several clubs.
Bayern have not made progress in contract renewal talks with Davies, and top European clubs are circling for his services.
Madrid are in the driving seat and have been talking with his agent for some time. They are keen on agreeing a deal with the player and his representatives before engaging Bayern in negotiations.
Los Blancos want a new full-back, with manager Carlo Ancelotti not trusting summer signing Fran Garcia.
The Italian manager has continued to use Eduardo Camavinga as his left-back, with Ferland Mendy battling injuries and poor form.
Madrid want to bring in a new face for the position and have their eyes on Davies, but Chelsea and City are also interested.
City do not have a recognised left-back in their squad at the moment, with manager Pep Guardiola opting for centre-backs Nathan Ake and Josko Gvardiol in that position.
This has left them lacking a proper threat from their full-back area, and they need options to fortify their ranks.
Meanwhile, Chelsea have the injury-prone Ben Chilwell, positionally inept Marc Cucurella and Ian Maatsen competing for their left-back spot.
Chelsea manager Mauricio Pochettino has mostly used Levi Colwill as his left-back. They could also use a new face.
Davies’ decision will be the key in this transfer battle, but don’t count out Bayern. The Rekordmeister are desperate to keep him and will fight tooth and nail not to let him go.
Bayern president Herbert Hainer reiterated their desire to keep Davies this morning, saying: “Davies is our player. He is with us and has a contract until June 2025.
“He is one of the best full-backs in the world, and of course, we want him to stay. I hope he also wants to stay.”
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