NEW YORK (CNN/Money) - In a deal that reunites former junk bond king Michael Milken with one of the properties of his Drexel Burnham Lambert days, two of the nation's leading child-care center operators have agreed to merge in a transaction valued at $550 million in cash.

KinderCare Learning Centers Inc. said late Friday that it reached a definitive agreement to be acquired by an affiliate of Knowledge Learning Corp., which is itself part of Milken's Knowledge Universe Corp. Besides the cash component, the companies said Knowledge Learning will assume $490 million in KinderCare debt, valuing the deal at more than $1 billion.

Upon completion of the transaction, the companies said they will serve more than 200,000 children through 1,980 child care centers, 461 before-and-after school programs, and 134 employer-sponsored child care centers in 39 states and the District of Columbia. The company will employ about 45,000 people.

KinderCare is 90 percent owned by affiliates of Kohlberg Kravis Roberts and Oaktree Capital Management. According to the statement issued by both companies, the shareholders are parties to the merger agreement.

Milken was first acquainted with KinderCare in the late 1970's, according to the research firm Hoovers Inc. Through Milken and Drexel Burnham, KinderCare raised money with junk bond offerings until its sale to a shareholder group in 1989.

The child care operator was forced to seek bankruptcy protection in 1992 under the weight of accumulated debt. It emerged in 1993, and was sold to the KKR-led group in 1997 for $525 million, according to Hoovers.

Milken, meanwhile, was convicted in 1990 of securities fraud regarding his Drexel Burnham activities and spent 22 months in prison, according to the Encyclopedia of World Biography Supplement.

He formed Knowledge Universe in 1996 in a partnership that included Oracle Corp. (Research) Chairman Larry Ellison, and bought the Children's Discovery Centers day care chain in 1998, renaming it Knowledge Learning, according to Hoovers.

YOUR E-MAIL ALERTS Michael Milken Knowledge Universe Corp. KinderCare Learning Centers Incorporated Company Debt or Create your own Manage alerts | What is this?

KinderCare and Knowledge Learning say they expect to complete the merger by the end of the year, pending regulatory approval. Thomas Heymann, chairman of Knowledge Learning, will head the combined company.

A Knowledge Learning spokeswoman wasn't immediately available to disclose the new company's operating name.