Watkins was available at the time from Brentford, though eventually would sign for Aston Villa.
Speaking on Sky Sports, Pleat, 79, said: "I spoke to Jose on a couple of occasions. I remember once he asked me about Ollie Watkins, I remember that quite clearly.
"And at the time the price Brentford was £28m, which Dean Smith took the opportunity at Villa - a lovely man, Dean Smith.
"We decided that that was too much money. Or Jose decided it was too much money to pay for a cover forward for Harry Kane."
Pleat added: "And in the end, we went for (Carlos) Vinicius, a player who didn't do too well. We has one of two other players who came as cover for Kane.
"They weren't too successful, but they were cover players.
"And we never really had the succession ready to take over from Kane when the inevitability came that he would leave the club."