Viacom’s board of directors has approved a split into two separate publicly traded companies from the company’s entertainment brands through a spin-off to shareholders.

Shareholders will hold shares of both companies, and the transaction is expected to be tax-free for them. The spin-off is expected to be completed by the first quarter of next year.

Viacom Chairman and CEO Sumner M. Redstone will be Chairman and controlling shareholder of both companies, which will be based in New York. Ms. Shari Redstone has been named to the newly created position of Non-Executive Vice Chairman of the Board by Viacom’s board of directors. She has been a member of the board for eleven years.

Board member and former Verizon Vice Chairman and CFO Frederic V. Salerno has been appointed to the newly created position of Lead Independent Director.

Summer Redstone had this to say, “Today we celebrate our past successes by stepping forward to embrace the future. This transaction is the logical extension of the strategic vision that created Viacom and recognizes the inherent diversity of our assets as well as the changing business environment.”

” We believe that this transaction will enable Viacom shareholders to fully benefit from the important gains we realized in building this Company by fully unlocking our significant untapped potential and creating new opportunities to build on our leadership positions, maximize earnings growth and fully exploit our considerable strengths,” he added. “…The Board believes that the transaction will provide current and potential stockholders with attractive investment options that are more closely aligned with their various investment objectives.”

Mr. Redstone will chair a Special Committee formed by the board aimed to assist and monitor the process of creating the two companies. Board members Shari Redstone, Frederic Salerno and Philippe Dauman will also serve on the committee.

The new company created through the spin-off will retain the Viacom Inc. name and will be led by Tom Freston. The new Viacom will be comprised of MTV Networks (including MTV, VH1, Nickelodeon, Nick at Nite, Comedy Central, CMT: Country Music Television, Spike TV, TV Land and many other networks around the world), BET, Paramount Pictures, Paramount Home Entertainment and Famous Music.

The other company, to be called CBS Corporation, will be led by Leslie Moonves and will combine the CBS and UPN broadcast networks, Viacom Television Stations Group, Infinity Broadcasting, Viacom Outdoor, the CBS, Paramount and King World television production operations, as well as Showtime, Simon & Schuster and Paramount Parks.

Chris is a staff writer for Murdok. Visit Murdok for the latest ebusiness news.