Updated from 11:02 a.m. EDT

In opting to split the company in two, E.W. Scripps ( SSP) reached a compromise between its controlling investors, steeped in a family tradition of newspaper publishing, and public shareholders spooked by what the company's CEO calls "the toughest 24 months in the history of the newspaper industry."

Those public investors sent shares of Scripps climbing $3.37, or 8%, to $45.65 Tuesday after the company announced plans to divide itself between its national brands and its local media franchises.

The split resolves a conflict that had been brewing between Wall Street and the Scripps family, which owns 44% of the company through a trust and controls the votes that elect a majority of the board's directors.

With the stock price stagnating, investors had been calling on Scripps to completely sell the newspaper business, which dates back to 1878 and served as the foundation for the company's empire. But that rich history may have led family members to balk at a sale , and legal restrictions included in the family trust agreement make it difficult for its members to sell some parts of the company.

By splitting up the media conglomerate, the family is able to maintain control, while other shareholders are provided with an opportunity to sell the newspapers and retain ownership in the company's fast-growing cable networks and Web operations.

Scripps CEO Ken Lowe said on a conference call Tuesday that the split was partly a way of being "responsive to shareholders" who would prefer to focus their investments on the company's growth portfolio, while also catering to those who want to stick with the "dependable cash flows" of the newspapers and local broadcast stations.

The new company, Scripps Networks Interactive, will include TV networks and Internet properties HGTV, the Food Network, the DIY Network, Fine Living Television and the Great American Country music channel. It also includes online comparison-shopping services Shopzilla and uSwitch. Those businesses have combined annual revenue of about $1.4 billion and about 2,100 employees.

The other company, E.W. Scripps, will consist of daily and community newspapers in 17 U.S. markets; 10 broadcast television stations; a character licensing and feature syndication business; and Scripps Media Center in Washington, D.C. The businesses have combined annual revenue of $1.1 billion and employ about 7,100 people.

"This is an important and logical next step for our shareholders, employees and all other stakeholders who have a direct interest in the success of our media businesses," said Lowe. "It's our intention to create two publicly traded companies, each with a sharpened strategic focus that would foster continued growth, solid operating performance and a clear vision on how best to build on the specific strengths of our national and local media franchises."

The transaction, which is projected to cost between $12 million and $15 million, is expected to be complete in the second quarter of 2008. It was unanimously approved by the company's board.

Existing shareholders will receive one share of the new company for each share they hold in the old company, and the Scripps family trust will maintain control over both.

Shares in the new company will be distributed to existing shareholders through a tax-free dividend, and both companies will emerge from the deal with a light debt load that could allow them flexibility to take on more leverage.

Lowe will be CEO of Scripps Networks Interactive. Richard Boehne, current Scripps chief operating officer and executive vice president, will become CEO of the remaining company.

The announcement comes about two weeks after Belo ( BLC) said it will spin off its newspaper unit from its 20 television stations and their Web sites.

Furthermore, major newspaper publishers like Knight-Ridder, Dow Jones ( DJ) and Tribune ( TRB) have agreed to buyouts recently amid declining financial results, as consumers increasingly adopt the Internet for their information needs.