Blues' defensive options have been hit after Scott Dann was ruled out for the rest of the season and the club have little strength in depth in that department.
Larsson's contract runs out in the summer and is currently free to talk to other clubs with Blackburn and Newcastle among those linked with a move for the Swedish international winger.
Davies was all set to move across to the East Midlands to Leicester City where he has been on loan this season but Birmingham came in with a last-minute bid for the former Luton and West Brom centr-half.
It is also been reported by Colin Tattum that if Larsson fails to agree terms with Villa or the club reject the offer, then Birmingham will pay an outright fee of £2.5million for the player.
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