"The contract was on the table and Arsenal withdrew it, and it sounds like to me the manager has said, "hold on a minute, I'm not giving him that kind of money, I can get a better player than that", Merson told TalkSPORT.
Lacazette endured a hard first season with Arsenal, but has five goals in 10 games this term.
"I think you've got to look at the situation and ask: 'How many top teams in the Premier League and elsewhere could he get in?'". The supporters can enjoy it with us but also we're speaking with our reality every day.
The Gunners have scored 17 goals in their last six Premier League games since their five-goal thriller at Chelsea FC and only title holders Manchester City have found the net more times than Arsenal in the current campaign.
With Manchester United, Juventus, AC Milan all linked with shock moves with the Wales global, former playmaker Paul Merson, now a pundit feels it would be a "typical Arsenal" move to allow a player of his magnitude departs without compensation.
"My focus is every single match".
"For him, last year, his first year in the Premier League, it was a different league than the French league also and the position also, the rhythm also, not the mentality because he has a very good mentality and he has very good chances usually to score".
'He is very important for us because he is our captain. The football, the future is tomorrow.
"The first is to finish in the top four and I think they can because they have a good squad, good quality, they spent a lot of money this summer for some players".
"I want the mentality for the next match".
"The first year when I arrived in Paris, we were thinking about signing Lacazette".
And while Petr Cech has been back on the training ground this week after a three-week injury layoff, Emery said he is not ready to play yet: "Petr Cech is getting better from his injury but he's not training with the group".
Emery said the only new injury concern from the global break is a small knock picked up by Sokratis Papastathopoulos, who could miss the Leicester match. "I want his performance like the other players".