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The Magpies are thought to be lining up a �4.5 million bid for Distin, hoping that the figure could tempt the cash-strapped club into parting with their captain.
Meanwhile, Souness has warned he could make sweeping changes to his squad.
"There are players here who are not good enough and I'll get rid of them," he warned.
"Since I've been here, the vast majority of the players have given me everything.
"I think it's important that everyone rows in the right direction.
"I know I would not be in this job if everything in the garden was rosy."
"I think it is public knowledge now that we have made an enquiry about Sylvain Distin and hopefully I can confirm that without upsetting Kevin Keegan," said Souness.
Newcastle are thought to have offered �5 million for City skipper Distin, however, City boss Keegan has insisted that the French stopper is not for sale.
"Distin is not for sale and we are interested in selling him," said Keegan.
Souness is confident that he change the club's fortunes with his reshaping of the squad in January.
"We are actively looking to improve the squad, and as I said I think there are exciting times ahead," added Souness.
"We're not to far away from getting it right, we already have some talented players here and with some new additions, I think we can look forward to moving up the table in the New Year."