Merson has said, however, that he intends to replace Kerr with a more experienced keeper.
"It was a tough decision to let him go but it is my job as manager to make such decisions," The Saddlers boss told the clubs official website.
"I want two goalkeepers who will fight hard for a starting place, so I'm not looking for a youngster who will merely sit on the bench and be an understudy to Mark Paston.
"Competition for places is healthy and keeps everyone on their toes."