The pacy winger seemed destined to leave the Etihad, so the update was expected by many fans, but leaves City with a difficult decision ahead of the summer.
Sane’s contract expires in a year’s time, meaning he could walk away for free if they don’t offload him this summer.
But they are reportedly ready to let him do so, and aren’t fussed about the financial hit they would take.
Sane was rumoured to be on his way to Bayern Munich last summer before suffering an ACL injury, which kept him out until April – though he is still yet to return to the pitch for the first-team.
They haven’t been shy about their desire to sign him this summer, and will reportedly fork out £50million in order to bring him back to Germany.
And Foot Mercato reports that City have already turned their attentions to Leverkusen winger Bailey as a replacement.
The Jamaican international has been in good form this season, having bagged five goals and five assists in 20 Bundesliga games.
He has attracted interest from elsewhere in the Premier League, with the Daily Mail
reporting that Chelsea and Manchester United are also interested.
The 22-year-old is valued at £40m, making him a much cheaper alternative to Kai Havertz for Chelsea and Jadon Sancho for United.
But they could both miss out, as Guardiola has seemingly made the first move to bring the ambipedal winger, who can also play as a striker.
City will reportedly only make a move to sign Bailey this summer if they manage to agree terms with Bayern Munich for Sane.
However, they won’t let him go on the cheap, and will not accept the £30m fee touted in German media this week.
Sane has spent the best part of a year recovering from his injury, which deprived him of a move back to Germany in the last summer transfer window.
And Guardiola admitted he sympathised with the winger for wanting to take his career in a different direction.
He said: “He has special quality that is hard to find around the world, but we tried before the injury, we tried before the the surgery and after that but he rejected. He has other wishes and I understand.”