You do not need to replace the valve. The tub spout has the diverter built into itself. Mixed hot and cold water from the valve will go down into the tub spout until you pull up the diverter knob on the tub spout which blocks the water flow and forces the water to exit through the shower head.

The tub spout is entirely separate from the valve. The 3 holes you see in the valve are the inlet ports for the hot and cold water and the exit port from the valve for the hot and cold "mixed" water. If you are going to replace the valve it is the entire thing you replace. All the way to the 1/2" threaded copper pipes that go into each of the 4 sides of the valve.

If you do not plan on replacing the valve then the next steps would be to repair the line to the tub spout. Then make sure you can find replacement trims for the valve- unless you are going to reuse the old trims in which case you are all good.

Answer from Kyle on Stack Exchange
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