Merrick, a two-time A-League title winner with Melbourne Victory, has been the favorite of CEO Lawrie McKinna since the end-of-season axing of Mark Jones.
But Fellow Scotsman and ex-Celtic winger Kean, who has been in charge of S.League club Brunei DPMM since 2013, was in talks with the Jets' Chinese owner Martin Lee until late on Monday, before being told he had been knocked back for the top job with the A-League wooden spooners.
Sources close to the club have learned that Kean, 49, lost out to Merrick, 64, due to his lack of experience at A-League level.
He did, however coach Blackburn for two seasons before departing with the club lying third in the Championship in 2012.
Merrick, who parted company with Wellington Phoenix eight games into last season after a poor start to the campaign, now gets a shot at redemption with Lee committed to providing the funds to rebuild a team which has 10 players coming off contract.
It's believed that Kean, who was has been handsomely remunerated in Brunei, was willing to take the job for a fraction of his current wage packet in order to break back into the mainstream.
But McKinna could not be swayed, and Merrick is now the man the club believes will drive it forward again.