Davies had an option activated by the club to extend his contract until the summer of 2013, however, Davies was transfer listed by the club on 22 May 2012 after he turned down a new three-year contract by the club. Derby manager Nigel Clough said that Davies turned down the offer due to "family reasons" and fully respected his decision. In July 2012, it was reported the Ipswich Town were interested in Davies. Former Derby manager Paul Jewell keen to reunite with the player, however the two clubs were "a long way apart" in agreeing on a fee for Davies with Jewell valuing the player at £500,000 and Clough at £1 million. The clubs remained in talks to agree a fee. In August 2012, it was reported that the transfer was on the verge of collapse. Davies played his first game in Derby's pre-season campaign against Chesterfield on 11 August 2012, scoring in stoppage time in the 3–1 defeat. On 20 August 2012, it was reported that Derby and Bristol City had agreed on a transfer fee for Davies.