If Bayern want maybe it's better for him to go to Bayern Munich. As long as you can still compete in Europe, it's better to keep playing there. Although maybe the salary received is not as big as in Saudi Arabia. Maybe at 35 years old he can go there. At least he will still be valuable and have the best stamina for the Saudi Arabian League. But Pep can keep it up, this is in preparation for a hectic schedule.
Of course Bayern Munich wants Kyle Walker, he is one of their main targets and according to legitimate sources, Bayern Munich have made a proposal to Kyle Walker (though i don't think there's been any negotiations with City of yet). Manchester City are also interested in keeping Kyle Walker, though i don't think he is going to start too many games for them, but he will be important for them in certain matches (as he was last season). I don't think there is any chance of Kyle Walker going to Saudi Arabia, from what i think, it is either he signs a new contract with City or moves to the German champions.