Why would we have confidence in Thiago if they don't? Are we becoming second rate team accepting other teams rejects?
I think he would improve our team but that doesn't say much. Our midfield is a big mess overall.
We need World Class midfield, I'm not sure Thiago is that. Thiago would be okay for now, but not long-term option to me.
They would just be dumb to let him go. Like they did with Kroos because they didn't want to pay him 1-2M more per season.
The people who are in charge at Bayern have a huge hard on for Box-to-Box midfielders and love their Javi Martinez in midfield. Also their next coach isn't really known for possession based 4-3-3 attacking football so that might play a role too.
So MAYBE they don't think they really need him because they can just play like James-Tolisso/Goretzka-Martinez. It's also not like they want to get rid of him on all costs, German papers report it like "if a good offer comes in they might think about it" and they say this for Boateng and Vidal too so who knows.
If we put in effort now we probably could sign him this summer although i don't believe in the 40M or so because that would just be way too good and financially Bayern isn't that stupid so we probably talk about more here.
Quality wise it doesn't really get any better than Thiago. Pjanic or Verratti aren't better than him imo and overall he could be the easiest to get out of all world class or near world class midfielders so IF we want to sign one and there is a chance we should go for it. If it wasn't for his injuries (not worse than Verratti btw who we wanted to sign last summer) and his slight inconsistency we would talk about an impossible to get or like 120M+ player.
and considering how his NT career ended i doubt he would like to work with Rakitic since iirc all the star players talked bad about him? Not sure on that one though, just remember Modric.