The Magpies landed the 26-year-old Freiburg frontman in a big-money swoop on Tuesday after speculation had linked the Black Cats with a move for him.
That was a cause for great delight on Tyneside, but O'Neill said: "News was filtering through here that he had turned us down - I'm afraid we hadn't made any enquires for the player at all. Good as he is, we hadn't done so."
On the prospect of closing the gap to the high-flying Magpies, O'Neill admits his side are focusing on their own battles rather than what their neighbours are doing.
He said: "Newcastle are doing brilliantly and of course, that might not please every Sunderland fan - it might not please any of them - but we can't do anything about it at the moment.
"We have to look after ourselves, and we will try to do that as best we can in the next couple of months."