This is a rumor that has been around for quite a long time and indeed the name Alphonso Davies has always been linked with Real Madrid. Currently, Real Madrid does not have a proportional left wing-back and maybe Alphonso Davies could be a solution for that. In fact, even though there are Mendy and Fran Garcia, this doesn't make Ancelotti feel less satisfied because if we look at Mendy, he is better at defending but less at attacking and Fran Garcia is the opposite. But if we talk about Alphonso Davies, he is the complete package as a wing-back and therefore Real Madrid will continue to try to get him. Moreover, the relationship between Real Madrid and Bayern Munich is always harmonious regarding player transfer issues, so this will make things easier.
Anyway, talking about Toni Kroos, it was not a free agent transfer and when he moved to Real Madrid his fee was 25 million euros. Maybe that was Bayern Munich's biggest mistake because they sold Toni Kroos at such a cheap price and if we look at his contribution to date (Real Madrid), of course Bayern Munich is very disappointed to let Toni Kroos go at such a cheap price.