The Mirror's Cross had this to say about the situation:
Bacary Sagna is set to be the next big-name departure from Arsenal after hitting deadlock over his contract.
The 29-year-old, who has 18 months left on his deal, has been offered just a one-year extension and there seems to be no shifting in the club's position.
Cross mentions that "France right-back is interesting Inter Milan, and a move looks increasingly likely after the latest round of talks reached a stand-off." That means Arsenal is going to have to give in, at least a little bit, assuming that Inter Milan's deal is juicier than the Gunners'.
Losing Walcott would be a little easier to stomach because Arsenal could possibly replace him on the outside, but Sagna might be the team's best overall defender. For a side that struggles in that area, letting a 29-year-old talent walk away shouldn't be an option.
What also separates Sagna is his ability to make runs up the right side. This makes the Gunners attack more dangerous, especially because he is so good at reading the game in front of him.
If Sagna is allowed to leave, someone like Carl Jenkinson would probably take his place. Jenkinson, at 20 years old, certainly has potential, but he also has a lot to learn. Unless the Gunners are trying to build for the distant future, making that switch isn't a good idea right now.
Sagna is fun to watch because of his versatility and willingness to take a risk. He needs to work on his finishing around the net, but very few players are perfect.
Allowing Sagna to walk creates a void on the right side and hurts the team overall. The Gunners can't afford to lose the talented players that they do have, and Sagna falls under that category.
Giving him the deal he wants makes sense, and he's earned it.