Where is Chrome's "Merge tabs and apps" option on Android Tablet running Lollipop?
The "Merge tabs and apps" option should be inside the "Basics" header. However, as of current writing, it seems Google didn't add this feature for Android tablet. The same case was reported on Android Central's forum, and the reply was


  It looks like that feature is only on Chrome on phones. It may be due to the fact that Chrome on tablets already has visible tabs, while Chrome on phones doesn't.




Chrome 39.0 setting on Android phone



Chrome 39.0 setting on Android tablet