The Senegal star signed for Toon this week amid rumours he had snubbed the chance to join Sunderland.
But boss O'Neill said: "It's a very big signing for Newcastle. News filtered through here that he'd turned us down, but I'm afraid we'd made no inquiries for the player — as good as he is.
"I was aware of him, but I hadn't done anything in terms of making an inquiry so it's well played Newcastle.
"It's part of the game. I've had some fans saying 'we got beaten to that one' but we didn't really."